A prominent agent who advises many landlord clients says the Capital Gains Tax cuts announced in the Budget are too small to incentivise people to sell. Jo Eccles, who runs the London-focused buying and selling agency Eccord, shares her perspective: “The Capital Gains Tax reduction announced in the Budget is unlikely to have a major impact on landlords’ decision making. The value of most landlords’ properties who bought within the past 10 years, since the peak of 2014, is actually less than what they paid.”
Eccles elaborates further, stating that the recent reduction in Capital Gains Tax may not serve as a significant impetus for landlords to divest their properties. She highlights that the market dynamics, particularly in the last decade, have often resulted in properties being valued lower than their original purchase prices. This scenario renders the potential tax savings from the reduction less influential in motivating landlords to sell their properties at the present moment.
A notable agent specializing in advising landlord clients offers a nuanced perspective on the impact of the Capital Gains Tax cuts recently announced in the Budget. Jo Eccles, the founder of Eccord, a prominent agency with a focus on property transactions in London, shares her insights. According to Eccles, while the reduction in Capital Gains Tax is a notable development, its influence on landlords’ decisions to sell their properties may be limited. She points out that many landlords who made property acquisitions within the last decade, particularly since the market peak of 2014, currently face a market scenario where the value of their properties is lower than their original purchase price.
Expanding on her analysis, Eccles underscores that the recent tax cut may not serve as a compelling catalyst for landlords to divest their properties. She highlights the prevailing market dynamics over the past decade, which have often led to properties being valued at levels below their acquisition costs. Given this backdrop, the potential tax savings resulting from the reduction in Capital Gains Tax may not wield significant influence in motivating landlords to pursue property sales at the current juncture. Eccles suggests that while the tax reduction may offer some relief, it is unlikely to substantially alter the decision-making calculus for landlords grappling with property sales considerations in the current market landscape.
“The prevailing impetus for landlords considering divestment remains rooted in the looming specter of heightened mortgage interest rates, exacerbated by the inability to offset these expenditures against rental earnings. Consequently, those without ample financial reserves to alleviate mortgage burdens are increasingly inclined towards initiating sales proceedings preemptively, particularly in anticipation of impending higher-rate mortgage renewals, given that rental yields frequently fail to adequately cover escalated mortgage liabilities and ancillary expenses.”
“Within the context of the recent Budget announcement, Chancellor Hunt’s decision to reduce the higher rate of Capital Gains Tax from 28 to 24 per cent has emerged as a notable development. Nonetheless, according to Eccles, the effects of this adjustment may not be as pronounced as anticipated. Interestingly, London’s foundational rental sector, predominantly comprising flats, appears to be witnessing a surge rather than a contraction. This phenomenon is attributed to the comparative stagnation characterizing the sales segment, fostering a climate conducive to rental market expansion.”
“Amidst low transaction volumes and lackluster sales figures, there’s a growing trend of sellers delving into the rental market, assuming the role of ‘unintended landlords’,” she observes.
“Landlords are navigating through a somewhat disjointed market landscape, wherein certain properties experience swift lettings while others struggle to gain traction. Rent levels remain steady, albeit landlords must remain agile to potential fluctuations in pricing to mitigate the risk of prolonged void periods.
“We’re witnessing a broader trend of rationalization across the property sector, with property owners prioritizing the divestment of surplus assets. The topic of timely disposal of rental properties frequently arises among our landlords as existing tenancies conclude, prompting them to test the sales waters.
“Nevertheless, many are grappling with the reality of subdued capital growth, with property values largely trailing below the peak observed in 2014, compelling them to re-enter the rental market for the interim period.”
