CGT and the private rental sector
This issue has been covered a lot and we have been keen to dive in.
Quite simply, we believe that it might be short term gain for the Government but long term pain for society as a whole.
The reason is that residential investors are far more important to the economy than the lazy “mini fat cat” media stereotype might suggest. Investors help build supply of rental stock, and currently there is a shortage of stock across the UK. The risk of the CGT rises is twofold:
a) Rental stock is sold to avoid CGT rises
b) Residential investors are deterred from adding to their portfolios due to high rates of CGT.
Both a) and b) risk causing a serious imbalance in supply and demand and the wider public will suffer from (much?) higher rents and fewer homes to choose from. This is a long-term risk and our view is that a wise Government, even with books to balance, need to take in longer-term views.
For context currently roughly 14% of the population live in private rental accommodation, but reports from the Department of Communities and Local Government in 2008 stated that by 2020 we will need this proportion to rise to 20%.
And the CGT rises will put a real dent in that.
Our views have been picked up by a few writers who are covering the subject.
The CGT story covers a lot of factors which go to the heart of the UK’s rental industry (long-term sources of supply; motives for further investment by individuals and/or corporates; Government policy or lack of it) and so if you’re interesting stay tuned since there is plenty of discussion ahead.