Record-breaking sales of London properties by landlords occur before predicted tax increases.

• The buy-to-let property market in London is experiencing a surge in sales as landlords anticipate increased taxes, putting pressure on the once profitable investment sector.
• According to data published by Rightmove on Thursday, approximately 29% of homes currently for sale in the capital were previously rented out.
• The buy-to-let market in the U.K., which was previously a lucrative source of wealth, is now facing challenges due to the removal of certain incentives and an increase in mortgage rates.

The U.K. Labour government's anticipated tax hikes are putting pressure on London landlords to sell their buy-to-let properties at record rates, making the once lucrative investment sector less attractive.

According to data published by Rightmove on Thursday, approximately 29% of homes currently for sale in the capital were previously rented out.

The increase in rental property sales across the U.K. is reflected in the spike, where 18% of all nationwide listings were previously tenanted, according to Rightmove.

Rightmove stated that it was uncertain whether the figures indicated a significant departure of landlords from the buy-to-let market, as opposed to a gradual decline in its appeal. In comparison to the previous five-year average of 14%, the proportion of ex-rental properties on the market in 2010 was 8%, according to Rightmove.

The Autumn Statement, which Finance Minister Rachel Reeve is set to release on Oct. 30, is expected to include a possible increase in Capital Gains Tax (CGT) and serve as a "potential driver" of increased sales.

The government's discovery of a £22 billion ($29 billion) hole in the public finances has prompted Prime Minister Keir Starmer to warn that the October budget will be "painful."

Reeves has declined to disclose details of her budget, stating in July that it is appropriate for the budget.

There is speculation about tax hikes, such as equalizing capital gains tax (CGT) with the tiered rates of income tax. Currently, buy-to-let landlords pay a flat rate of 18% or 28% on the sale of their property, regardless of their tax bracket.

The potential equalization of CGT is a concern for many landlords, as stated by Marc von Grundherr, director of Benham and Reeves.

The average landlord's tax could increase significantly if the Labour government implemented its plan, according to him.

"Another blow to vital housing stock providers in the rental sector, following recent legislative changes that have already reduced profitability, would be yet another setback."

The buy-to-let market in the U.K., which was previously a lucrative source of wealth creation, has faced challenges in recent years due to the removal of several tax incentives and the impact of the cost-of-living crisis and higher interest rates on affordability for landlords. As a result, the number of new buy-to-let mortgage approvals decreased in 2023 for the first time since their introduction almost three decades ago.

According to Savills, the estimated decline in the stock of investment properties and second homes is 8.7% compared to three years ago.

The property market is experiencing a downturn, but relief is coming as borrowing costs are being eased following the Bank of England's August rate cut, resulting in a surge in homebuyer activity.

According to Rightmove, the total number of new properties on the market has increased by 14% compared to 2023.

REA Group, owned by Rupert Murdoch, is considering a takeover of Rightmove, a real estate company. However, Tim Bannister, a property expert at Rightmove, cautioned that the recovery in the real estate market may not be felt uniformly and warned that a stricter regulation on buy-to-let investors could worsen the affordability issues in the rental market.

He stated that a thriving private rental market requires investment from landlords to offer tenants a diverse range of housing options.

Over the past few years, we have observed how supply and demand disparities can lead to rising rents. As a result, there is concern that without incentives for landlords to remain in the rental market, tenants will ultimately bear the brunt of the consequences.