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Capital Gains Tax

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Renting out property is a hassle and the inome is no longer attractive when compared to other investment opportunities. So why do landlords hold onto property? The answer is:

(1) Some naievely believe that bulls runs can last indenfinitely.

(2) Others have aquired capital gains liabilities which can only be mitigated with a delayed sale

Despite historically low interest rates and unpreceded availability of credit, very few first time buyers can now afford to buy. This must suggest that the bull market has run out of steam.

So what happens if property prices stand still...............?

(1) Naieve investors will start to realise that the bull run is dead and lose heart.

(2) Capital gains liabilities will start to fall for more expienced investors.

Many BTLs who bought within the last three years will have no capital gains liabilities at all and with each year of zero growth, fewer will be left with capital gains liabilities. If property prices start to fall, tax liabilities will evaporate even more quickly.

So, who in their right mind would want an investment which is a hassle to administer, has poor income and low growth potential (unless it was for tax mitigation reasons)? What will happen to the property market when fewer people are holding on for tax reasons?

Because we now have a historically high ratio of BTL ownership we may now have an inherentlymore volatile market. It is not difficult to see how a cycle of panic selling could be triggered if investors start to race for the exit.

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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