Landlords in the UK are reconsidering their property investments due to potential changes in Capital Gains Tax (CGT) and new Energy Performance Certificate (EPC) regulations.
- Anticipated CGT hikes have resulted in landlords reviewing their rental portfolios and liquidity, leading to a surge in loan-to-value ratios.
- The proportion of buy-to-let (BTL) purchases and mortgages that did not proceed has increased significantly, reflecting landlords’ cautious approach.
- Existing landlords are more likely to optimise through remortgaging rather than expanding their portfolios under current economic pressures.
- Industry figures suggest this conservative trend will continue unless significant changes are announced in the upcoming budget statement.
Anticipated increases in Capital Gains Tax (CGT) and new Energy Performance Certificate (EPC) regulations have created uncertainty within the UK property market, causing landlords to reconsider their investment strategies. The analysis performed by Acre highlights that landlords are strategically reviewing their rental portfolios and liquidity reserves in anticipation of these changes.
The move to leverage properties more substantially has been noticeable, with loan-to-value (LTV) ratios reaching unprecedented levels of almost 72% in September. Such ratios indicate a strategic shift, as landlords either take on increased debt backed by their properties or react to current low mortgage rates.
In the buy-to-let sector, nearly 10% of purchases and mortgages were halted by landlords amidst growing concerns over forthcoming fiscal adjustments. This pattern is particularly marked by an increase in average LTV for buy-to-let purchases to 71.75% as of September 2024, a rise of 2.5% over the previous year.
The volume of buy-to-let purchase and remortgage cases that failed to proceed markedly rose from 6% in August to 10.5% in September. This trend continued into October, with 8% of buy-to-let applications being abandoned in the past quarter, demonstrating a market reacting to evolving regulatory and tax landscapes.
Interestingly, while new buy-to-let purchases have decreased, buy-to-let remortgage cases have remained stable, representing 8.19% of all mortgage cases. This stability suggests that current landlords are not expanding their holdings but are opting instead for remortgage solutions to optimise their financial standing under these taxing conditions.
Reuben Thompson of Acre noted a burgeoning pattern among landlords as they anticipate decisions concerning Capital Gains Tax and Energy Performance Certification regulations. This apprehension has led to a conservative financing approach aimed at enhancing liquidity without over-leveraging positions.
Furthermore, remarks by Justus Brown underscore the volatility that CGT anticipation has injected into the decisions of second home owners, with a notable impact already being witnessed in the sector.
The current cautious stance of landlords looks set to persist until definitive fiscal policies are disclosed.
