Rics: CGT changes show muted impact on buy-to-let

Fears of a wave of selling by buy-to-let landlords following changes to capital gains tax appear misplaced.

That is the view of the Royal Institution of Chartered Surveyors (Rics), which finds just two per cent of landlords are playing to sell property when current tenancy agreements expire.

This is down from the 4.6 per cent of landlords planning to sell in the three months to the end of January, and the 6.5 per cent in the three months prior to this.

There had been fears the restructuring of capital gains tax – which could see landlords face a bill of between 24 and 40 per cent on a property, compared to the previous 18 per cent – would prompt a sharp increase.

However, this appears not to have been the case.

"Fears landlords would take advantage of the more favourable capital gains tax regime to bail out of the buy-to-let market appear misplaced," commented Simon Rubinsohn, Rics chief economist.

"Significantly, with the reduction in loan-to-value (LTV) ratios by lenders leaving first-time buyers struggling to access the housing market, rents are now rising sharply and the expectation is that this trend will continue."

"The incentive to cash in on the lower tax rate is being outweighed by attractive yields."

The sharp moderation house prices – with RightMove and Halifax reporting falls in asking prices and sale values respectively – is also likely to be discouraging landlords from making a sale.

Yet, while the buy-to-let market appears stable at present, the changes to capital gains tax only took effect this month, and the longer-term could see a more dramatic impact, argues Rics.

Chris O'Toole