Renters hit hardest as landlords sell up ahead of potential capital gains tax hike

Renters are paying the price as demand becomes scarce and costs rise, says Hargreaves Lansdown.

The firm reveals that many landlords are selling off properties due to fears of a potential capital gains tax increase in the upcoming October budget, while tenants are now spending a significantly larger portion of their income on rent.

The news comes after the introduction of the Renters’ Rights Bill in Parliament, which is expected to ban Section 21 as soon as the Bill becomes law, regardless of the current court backlog.

Landlords continuing to sell up

According to the Office for National Statistics (ONS), renters spend 28.8% of their income on the rent – up from 26.6% a year earlier and 25% five years earlier.

Sarah Coles, head of personal finance, Hargreaves Lansdown: “The white heat of the cost-of-living crisis may have cooled for an awful lot of people, but renters are still getting burned. And as more people further up the income ladder loosen the purse strings, they’re missing some vital bills. These weaknesses in people’s finances could come back to bite them.

“There’s no let up in the squeeze on renters. They’re now spending a far higher percentage of their income on keeping a roof over their head, and the proportion of their income they’re having to hand to the landlord is rising faster than at any other time in the past five years.”

Ms Coles says renters are struggling with finding a place to live as landlords sell up.

She said: “Landlords are continuing to sell up – concerned about higher costs from more regulation and bigger mortgage payments. More recently, the trend has been exacerbated by landlords alarmed by the prospect that the government could hike capital gains tax in the Budget.

“It means more tenants chasing dwindling numbers of properties, so they’re having to pay through the nose to find a place to live.”

Light at the end of the tunnel

Ms Coles adds for those with mortgages there is positive news as the Bank of England could cut rates again.

She said: “Attention has been focused on the pressure on those with mortgages now that interest rates have risen, but compared to renters, they have nothing to worry about.

“The HL Savings & Resilience Barometer in July found that those who have remortgaged onto a higher rate between the end of 2022 and the middle of 2024 have an average of just £315 left at the end of the month – £95 less than those who are yet to remortgage. But compare that to renters – who have just £79 left at the end of the month.

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