The number of rental properties being sold by landlords is at its lowest level in seven years.
A total of 131,900 properties were sold by landlords in Britain last year, the smallest number since 2013.
The research by estate agents Hamptons International found that landlords kept their buy-to-let for 9.1 years on average.
And they sold their buy-to-let property for £82,450 or 42 per cent more than they paid for it on average.
This is up from £79,060 in 2019, and is the first annual rise in more than five years.
Landlords in London made the biggest gains, receiving typically £302,300 or 71 per cent more than originally paid for the property, having owned it for 9.8 years on average.
This is perhaps unsurprising given that house prices tend to be significantly higher in the capital than elsewhere in the country.
By contrast, those landlords with rental homes in the North East continued to make the smallest gains.
The average landlord who sold in that region made £11,310 or 16 per cent, having owed the property for eight years. More than a third of investors in the region – at 36 per cent – sold their buy-to-let at a loss, compared to 12 per cent in England and Wales as a whole.
Across England and Wales, 77 per cent of landlords would have paid capital gains tax on their profit last year, while in London, this figure rose to 91 per cent.
It comes as the government is looking into an increase in the tax rate paid on capital gains – potentially bringing it into line with income tax.
Capital gains tax is a tax on the profit of an item sold that has increased in value. It’s the gain that’s taxed rather than the amount of money received.
It’s levied on gains made from the sale of second homes and buy-to-let properties, but not main residences. The rates currently stand at 18 per cent for basic rate taxpayers and 28 per cent for higher rate taxpayers.
However, the government’s considering whether to increase the tax rate on capital gains made on buy-to-let properties to 20 per cent for basic rate taxpayers and to 40 per cent for higher rate taxpayers.
Aneisha Beveridge, head of research at Hamptons, said: “Last year, the number of homes sold by landlords reached a seven-year low. A pause in the housing market during the first Covid-induced lockdown, which suppressed overall transactions, combined with an eviction ban throughout the remainder of 2020, limited the opportunity for landlords to sell up.
“Landlord sales have been relatively high over the last few years due to tax and regulatory changes that have reduced the profitability for some investors. But given tax relief on mortgage interest will be fully phased out from the 2020-2021 tax year, it seems as though most landlords who would be hit hardest by these changes have already left the sector.
“Over the last few years, the average capital gain made by a landlord has been shrinking. But despite the pandemic, stronger house price growth seems to have reversed this trend. Landlords who have been in the game for the longest period of time have reaped the largest rewards.”
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