Real estate investor experiences a 10% year-on-year decrease in gains

Landlords Experience 10.1% Decrease in Capital Gains for Buy-to-Let Property Sales: Hamptons Study

A recent study by Hamptons reveals that landlords who sold their buy-to-let properties this year earned 10.1% less compared to the previous year. Capital gains for selling investors amounted to £94,800, a decline from the previous figure of £105,300.

Regional Variations in Capital Gains

The disparity is most pronounced in the North East, where landlords garnered just £22,000 this year, marking a 15.7% decrease from the £26,400 earned last year.

According to Aneisha Beveridge, Hamptons’ head of research, as housing prices undergo a decline, indications suggest that landlords who are presently selling may have missed the market’s peak. Some investors are finding solace in achieving unprecedented rental growth, which is gradually offsetting the financial balance for landlords.

Beveridge notes that the combination of lower housing prices and elevated rents will likely bolster the rental market, as more landlords delay the decision to sell. However, this trend could also dampen the government’s capital gains revenue from landlords selling their properties in the coming years.

Challenges Faced by Investors

The study further highlights that a portion of investors incurred losses, with 6% of landlords in England & Wales selling their buy-to-let properties for less than their purchase price—a rise from 5% last year. Moreover, 19% of those selling flats and 22% in the North East sold properties for less than their initial investment.

Rental Market Trends

Across Great Britain, rents surged by 9.9% compared to the previous year, marking the 27th consecutive month of rental growth exceeding 5%. Beveridge asserts that newly introduced properties into the market are consistently achieving record rents, making it challenging to predict substantial downward pressure on the growth rate.

Challenges and Opportunities for Landlords

The study points out that approximately 35,000 landlords transition from fixed-rate mortgages every month, contributing to ongoing cost escalation for landlords. In preparation for mortgage remortgaging, landlords are grappling to achieve financial equilibrium by reducing debt and adjusting rents that had fallen below market rates.

Geographical Price Trends

Over the past seven years, Northern England experienced the most significant increase in house prices, whereas parts of London and the South East witnessed relatively stagnant prices. Despite this, due to higher average prices, London landlords who sold their properties still attained the largest gross capital gains. However, this year’s figure of £308,500 reflects a 3.4% drop from the previous year’s £319,300 and a 15% decline from the peak of £365,000 in 2016, attributed to slower price growth.