Will there be a surge of BTL's unloading their property in April?

pamaris

I was just wondering what effect you guys think the new CGT rates will have on people selling their BTL's. Will there be a glut of flats and FTB type homes on the market in April?

carolt

I think canny landlords can already get very substantial savings on their CGT, plus for those who've held property for long enough, and made the biggest paper gains, it's actually cheaper to sell now before the new regime kicks in, thanks to taper relief. True, those who've bought very recently will benefit from new rules after April, but most of those won't be too worried about protecting their capital gains as they won't have made any!

No, I think landlords will start selling up long before then, if they have any sense... Though I do agree that trying to hold back the crash till then/alleviate it, probably played a large part in Gordon Brown's thinking when he changed the CGT rules recently.

Certainly, in the village where I live, where there are probably(literally) no more than about 20 rental properties total, and no more than 3 or 4 maximum for rent at any one time, 2 of the big ones have both just come up on the market within the last week and a half. Don't know if that's typical, but they, at least, have obviously decided to cash their chips in now...

mystic_trev

carolt wrote: »

I think canny landlords can already get very substantial savings on their CGT, plus for those who've held property for long enough, and made the biggest paper gains, it's actually cheaper to sell now before the new regime kicks in, thanks to taper relief.

No it's not!

CGT after Max Taper relief = 24%

CGT 1/4/08 = 18%

silvercar

I know of two people who had decided to sell let properties and have both now decided to wait until after April.

Tax wise it makes sense to wait, but then you are banking on getting the price you could now. The next few weeks are actually crunch time. If your property is vacant you need to decide whether to let on a 6 month AST or to sell now, keeping the property empty while you wait for the tax rules to change will cost.

BTW its the date of exchange that counts not completion!

carolt

From the FT (October 12 2007):

In some cases, however, properties are subject to a CGT rate of just 10 per cent at present – for example, where they are deemed “furnished holiday lets” for short-term rental. From April, selling will mean tax at the new 18 per cent rate.

Likewise, the removal of indexation allowance could push up tax bills for many long-term owners of property and other assets.


Also, as silvercar points out:

Ray Boulger, senior technical manager at John Charcol mortgage brokers, reckons that some nervous property owners might look to agree sales before April but defer completion until after then to benefit from the CGT change.

pamaris

My thought is that there are some pros who see that we've passed the peak and will try and cash in now in case prices fall. However, there are probably a bazillion amateurs who saw the headlines, thought woo hoo 18%, might as well wait till April, prices will double between now and then anyway.

Maybe not that extreme, but I wonder how many BTL investors will weigh the tax relief against the possibility of a price fall on their property. In addition, how many have considered that there will be a glut of similar properties for sale in April, thus... reducing the achievable price.

carolt

Well, I am not worried - crash now, or crash in April, anyone? Except for the very few who 'have' to buy - that is those who are currently committed to a sale, already laid out money on a survey etc, I'd advise waiting till April at least till you commit yourself, as there may well be an unusually large choice of available properties this year...

pamaris

Actually we're not even going to think about buying till next summer. We'll see what things are like then... we're going to put in reasonable offers (well, reasonable to us) and if the prices are not to our liking, we'll rent for a year or two. I was thinking it might make things come down hard and fast though.

santashelper_2

so if you had just brought a btl would you keep it long term, let it short term or sell it now

Gorgeous_George

If BTLers Bought To Let (there's a clue in the name) then selling will not feature in their business plan.

Of course, property investment speculators (PIS's) who rented their properties out while the market rose may indeed sell. I think anyone who already qualifies for substantial taper relief will lose out due to lower prices. Recent property speculators will have little, if any, gain to tax.

If PIS'sers want to sell next April, I'd suggest marketing it now. The market may be a little sloooooooow.

Any PIS's takers out there?

GG

Gorgeous_George

santashelper wrote: »

so if you had just brought a btl would you keep it long term, let it short term or sell it now

Where would they be bringing their BTLs?

GG