14:25 PM, 27th October 2010, About 12 years ago
One in four buy to let landlords have solid confidence in property investment and believe now is a good time to invest.
Only 2% consider now is a good time to reduce their portfolios – and although the rest think now is not the time to invest, one in three (32%) want to buy more buy to let property in the coming year.
The figures come from the latest survey of buy to let landlord confidence by LSL Property Services.
The survey also shows 6% of landlords are thinking about leaving buy to let – although this includes those who are retiring or giving up for lifestyle reasons.
“Rising rents and house prices offered landlords bumper annual returns at the start of the year, and this was reflected in the surge in confidence,” said LSL corporate client managing director David Brown.
“This has fallen slightly following the slowdown in house prices and the capital gains tax hike. Nevertheless, the vast majority of landlords remain committed to buy-to-let.
“Attractive rents – just £12 per month shy of their peak – and increasing yields underpin their confidence in property investment.”
Growing tenant demand is helping to cushion slowing capital gains with 37% of landlords witnessing an increase in tenant demand, with one in 10 landlords reporting a substantial growth.
Just 7% of respondents saw a decline. Two in three (63%) of landlords expect this increase in demand to continue in the next two years, compared to the one in 20 landlords who anticipate demand will fall away.
The introduction of a higher capital gains tax for higher band taxpayers is a driving factor behind the slight fall in landlord confidence. A third (34%) of landlords who saw the current market as attractive for investment stated property still offer better capital returns than other investments – a drop of 7% since the last quarter.
The average property investor owns three properties, and has seen capital gains of £152,219 since they bought their properties. If they sold their properties today, they would face a capital gains tax bill of £39,793 – an increase of £11,369 from the previous tax regime.
Landlords with a single property made average capital gains of £75,111. If they sold now, the average tax bill would be £18.
“The increased CGT hit many property investors’ confidence. And it will hit many more in the pocket over the next few years,” said Mr Brown.
“But the hike wasn’t as steep as first feared, and we’re already seeing landlords adapt their disposal strategies for their portfolios, planning to spread sales over several tax years to mitigate their exposure to the higher rate.”
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