Landlords save cash following reform

Landlords who sold property in the second quarter of 2008 could have paid as little has half the capital gains tax (CGT) of those who sold earlier.

According to The Mortgage Works (MW), which has tracked the cumulative property price increase over the last five years for a £200,000 flat and house bought in the UK, the landlords achieved property price appreciation of 43 per cent (houses) and 42 per cent (flats) to the first quarter of 2008.

Landlords who sold these properties in quarter one of 2008 faced high CGT charges of created a total tax burden of £34,895 (£30,597 CGT and £4,298 cumulative income tax [CIT]) on houses and £34,603 (£30,241 CGT and £4,362 CIT) on flats.

"Although the buy-to-let market has, like all sectors, been impacted by the credit crunch, landlords have continued to buy and sell properties on a regular basis," explained Andy McQueen, managing director of The Mortgage Works.

"This has resulted in buy-to-let forming a higher proportion of net lending than previously seen in the mortgage market," he added.

Figures from the Association of Residential Letting Agents' (ARLA) measuring landlords' desire to sell property also indicate that landlords continue to monitor a variety of market factors carefully when handling their portfolios.

While the percentage of landlords who said they had intentions or expectations to sell property jumped from 13.8 per cent in December 2007 to 18.1 per cent in March 2008 - possibly in anticipation of the CGT changes - it fell way back to 7.3 per cent in June 2008.

This suggests landlords were choosing to bide their time in a market of falling house prices.

"Good buy-to-let investors always treat their property portfolios as a long-term investment, and the ARLA figures show that contrary to having to offload properties, many landlords are choosing to hold onto their investments until house prices begin to either stabilise or increase," concluded Mr McQueen.

Chris O'Toole