As private landlords consider exiting the market, Eddisons’ property auctions experts offer help

Thankfully, that wait is nearly over as Rachel Reeves is set to deliver the first Labour budget on Wednesday 30th October, and a key concern for private landlords and investors is the potential increase in Capital Gains Tax (CGT).

We’ve already seen a number of private landlords pausing plans to add to their portfolios. We're also speaking to others who are considering exiting the property market entirely, to avoid being hit with large tax bills.

So, if you’re a private landlord thinking of exiting the market before a potential CGT increase, how can property auctions help you?

What do we know?

Financial analysts widely predict that CGT will be increased to fall in line with Income Tax. While nothing has been formally announced, the Government has hinted at “difficult decisions” in this budget and has committed to not increasing taxes on working people. So surely a CGT increase seems likely.

What is Capital Gains Tax?

In short, Capital Gains Tax is levied on the increase in the value of an asset, so the profit a seller has made on their investment at the point they sell it.

Currently, CGT is charged at 18% (basic rate) and 24% (higher rate), while Income Tax is charged at 20%, 40%, or 45%. It is widely believed that the Government may increase CGT to match Income Tax rates.

What does it mean for the market?

If we see a significant number of private landlords leaving the market, then it’s likely to lead to a supply and demand issue. With fewer rental properties available, rents may rise as the remaining landlords feel the squeeze. Landlords might also try to save on costs by delaying maintenance, which could lead to a decline in living standards for tenants.

That being said, I think it’s unlikely any changes will come into effect immediately. I believe the increase is more likely to happen by the spring, giving sellers time to prepare. This means the next quarter could be a busy time for property transactions as people rush to sell at the current, lower tax rate.

Why consider auction?

Auctions offer a secure and, crucially in this case, fast route to sale, with most completion periods set at just 30 days. In contrast, a private treaty sale can take 5-6 months to complete and statistically has a 1 in 3 chance of falling through.

We could list a property for auction today, and within two weeks, have a legally binding sale agreed, with contracts exchanged and the entire process completed 30 days after.

Landlords also don’t need to worry about whether their property is tenanted or vacant. Auctions attract a wide variety of buyers, many of whom are looking for a ready-made income generator, as well as owner occupiers, investors and housing associations. In fact, since 2022, 12,668 tenanted properties have been offered for auction in UK (EIG).

If you’re a private landlord looking at your options, our friendly and experienced team of property auction experts would be happy to have a no obligation conversation about your portfolio and the likely sale prices you could achieve by auction.