BDO Stoy Hayward senior tax partner Stephen Herring is warning house prices could fall by up to 10 per cent in some areas as buy-to-let investors take advantage of a reduction in capital gains tax.
Under CGT changes announced in the pre-Budget Report last October, sales made after April 6 will incur only a flat 18 per cent capital gains charge. With the existing regime, investors have to pay up to 40 per cent in tax.
Herring says some areas could see a 15 to 20 per cent increase in the supply of former buy-to-let stock as a result. He says: “We could easily see in areas where there are a significant number of buy-to-lets 10 to 20 per cent of additional properties going onto the market.”
Herring says areas dense in buy-to-let properties or second homes would be most acutely affected. He says: “From Monday there will be a much lower tax charge which could encourage a significant majority, maybe 20 per cent of owners of buy-to-lets, to monetise capital gains made to date. They could keep the other 82 per cent and look to re-enter the market when the position is clearer.”
But lenders insist the effect on the market will be far less dramatic.
BM Solutions head of sales Phil Rickards says: “Landlords have numerous factors to consider when looking at their investment property. From location to rents, tenants to regulation – there are several crucial points for contemplation. As investors weigh up their decisions tax, and specifically capital gains tax, is a fundamental factor however it is just one factor and the changes are unlikely to lead to a mass exodus from the market. Research consistently shows that the vast majority of landlords take a long term approach indeed research shows that the majority are looking to stay in the market for around 15 years.”