London landlords sell up properties ahead of anticipated Labour clampdown

LONDON — London landlords are selling up their buy-to-let properties at record rates as anticipated tax hikes from the U.K. Labour government add further pressure to the once lucrative investment sector.

Almost one-third (29%) of homes currently for sale in the capital were previously rented out, data published on Thursday by property portal Rightmove showed.

The spike mirrors a wider uptick in rental property sales across the U.K., where 18% of all nationwide listings were previously tenanted, according to Rightmove.

Rightmove said it was not yet clear that the figures pointed to a “mass exodus” by landlords, but rather to a gradual decline in the appeal of the buy-to-let sector. The previous five-year average of former rental listings for sale was 14%, while the proportion of ex-rental properties on the market in 2010 was 8%, Rightmove said.

It highlighted that it expected tax hikes in Finance Minister Rachel Reeve’s forthcoming Oct. 30 Autumn Statement — including a possible increase in Capital Gains Tax (CGT) — to become a “potential driver” of the increased sales.

Prime Minister Keir Starmer has already warned that the October budget would be “painful” after the government said it discovered a £22 billion ($29 billion) hole in the public finances, when it took office in July.

Reeves has refused to be pressed on the contents of her spending plan, telling CNBC in July that such matters are “rightly for the budget.”

Speculation has mounted around tax hikes, including an equalizing of CGT, which would bring it in line with the tiered rates at which income tax is levied. Currently, buy-to-let landlords have to pay a flat rate — 18% for basic-rate taxpayers and 28% for higher-rate taxpayers — on the sale of their property.

Marc von Grundherr, director of London-based real estate agency Benham and Reeves, said that the potential equalizing of CGT was “of course” a concern for many landlords.

“If the Labour government was to follow through with it, it could make for a significant increase in the tax paid by the average landlord when the time did come for them to exit the sector,” he said.

“This would be yet another blow to those who provide vital housing stock that is sorely needed within the rental sector, following a string of legislative changes already introduced in recent years to dent profitability.”

The U.K. buy-to-let market — once a key area of wealth creation — has come under pressure over recent years, given the repeal of several incentives, including tax relief for property investors. The recent cost-of-living crisis and higher interest rates have also reduced affordability for landlords, with the number of new buy-to-let mortgage approvals shrinking in 2023 for the first time since they were introduced nearly three decades ago.

It is estimated that the stock of investment properties and second…