Landlords and Second-Home Owners Rush to Sell Amid Tax and Energy Changes

Landlords and second-home owners in the UK are facing a tumultuous market as uncertainty looms over potential tax revisions and energy-efficiency regulations. The landscape has significantly shifted in recent months, prompting many property owners to put their homes on the market.

Increasing number of listed properties in the UK

The Holiday Home Sell-Off

According to recent research by Zoopla, the number of properties listed for sale has surged by 12% year-on-year. This spike is predominantly observed in coastal areas that are popular for holiday homes. In cities such as Truro, Torquay, Exeter, Bournemouth, Lincoln, and Norwich, property listings have soared by over 40%. Interestingly, approximately one-third of these newly listed homes are classified as ‘chain-free’, indicating a shift towards sellers who are eager to move without the complications of previous property transactions.

Many sellers are reacting to the ongoing uncertainty regarding the upcoming Autumn Budget scheduled for 30 October, where significant tax amendments could be announced. Specifically, there are whispers of potential changes to capital gains tax (CGT), which may rise to align with current income tax levels. At present, the maximum CGT stands at 28%, while income tax could reach as high as 45% for the top earners. Sarah Coles from Hargreaves Lansdown notes:

“Owners are falling over themselves in a rush to shift holiday homes and buy-to-let properties. They’re panicking that changes that might come through in the Budget could saddle them with a huge tax bill on their gains.”

The Impact of Regulatory Changes on Landlords

Beyond tax concerns, landlords are increasingly worried about forthcoming regulatory changes. A study conducted by Goodlord and Vouch reveals that 30% of landlords have sold or listed a rented property in the past year, with 20% considering reducing their property portfolios. A significant proportion of landlords cites potential regulatory reforms, such as the upcoming Renters’ Rights Bill, as a contributing factor to their decision to sell. This bill aims to eliminate ’no fault’ evictions and gives tenants more power to contest rent increases.

In addition to tenant protections, landlords are also expressing concerns about impending energy efficiency requirements. Many are now required to upgrade their rental properties to meet a minimum Energy Performance Certificate (EPC) rating of ‘C’, further complicating the operational landscape.

New legislation may impact rental properties

Rising Council Tax Bills

Starting from April 2025, owners of holiday homes in England could face an even steeper financial burden, as councils will be empowered to double the council tax on second properties. This adjustment stems from the Levelling Up and Regeneration Act 2023, which grants local councils more discretion concerning council tax bills on properties not designated as a primary residence. Already, Scotland and Wales have been implementing higher tax rates for second homes, fuelling discussions about affordability and fairness within the housing market.

Buy-to-Let Mortgage Rates Outlook

On a broader market scale, buy-to-let mortgage rates are currently hovering at their lowest levels since September 2022, though they still exceed the long-term averages. With the average buy-to-let fixed rate settled at 5.45%, it poses a considerable increase compared to 4.38% just two years ago and a stark difference from 3.16% five years back. Consequently, landlords who are poised for remortgaging might experience heightened repayment amounts as they navigate these rising rates.

For those shopping for mortgages, it’s advisable to seek assistance from a mortgage broker, whose expertise can illuminate the best deals currently available.

Current trends in mortgage rates

Conclusion

As the UK faces potential tax hikes and stringent regulations affecting landlords, the rush to sell properties, particularly holiday homes and buy-to-let ventures, is likely to intensify. Each landlord’s situation is different, and the implications of upcoming regulations and financial conditions underscore the need for proactive planning. Buyers and sellers alike should remain vigilant and informed to navigate this ever-evolving market landscape successfully.

For landlords and second-home owners, the next few months will be crucial. With the Autumn Budget on the horizon and rising concerns regarding property viability, these changes may redefine the future of property ownership in the UK.