Landlords made an average of £82,000 when selling their buy-to-let properties last year, according to new research.
The typical landlord sold their buy-to-let for £82,450 more than they paid for it in 2020, an average value increase of 42 per cent, according to estate agent Hamptons International.
This was an increase of £3,390 or 4 per cent, compared to the average gain of £79,060 in 2019.
Cashing in: Buy-to-let landlords typically made an £80,000 profit when selling a property
The increase in house prices in the past year has had a significant impact on these figures, with the average cost of a home up around £15,000 according to a number of monthly indexes.
But despite the potential cash windfall, the number of landlords who decided to sell off a property was at its lowest in seven years.
A total of 131,900 homes were sold by landlords in Britain in 2020, the smallest number since 2013.
Aneisha Beveridge, head of research at Hamptons, said: ‘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 2020/21 tax year, it seems as though most landlords who would be hit hardest by these changes have already left the sector.’
The number of homes sold by landlords fell to a seven-year low in 2020, says Hamptons
Landlords who did decide to sell in 2020 had owned their property for just over nine years on average.
Those in London made the biggest gains when selling their rental properties, and the top 10 local authorities where landlords made the biggest gains were all in the capital.
The average landlord in the capital sold their buy-to-let for £302,200 or 71 per cent more than they originally paid for it, having owned the property for just under 10 years.
Profits for London landlords selling up had been declining in recent years.
Although this trend reversed in 2020, profits have not hit the highs seen in 2016 when they made an average gain of £364,960.
That year marked the high point for landlord profits, when many investors, having bought at the bottom of the market following the 2008 financial crash, decided to sell up.
Those selling in Kensington and Chelsea made the biggest gains in 2020, selling homes for £784,980 more than they paid for it them on average. The gain they made was 9.5 times greater than the average in England & Wales.
Landlords in the North East continued to make the smallest gains. The average landlord who sold up in the North East made £11,310 or a 16 per cent capital gain, having owned the home for eight years.
The average gains landlords made when selling a property in 2020, sorted by region
More than a third of investors in the region sold their buy-to-let at a loss, compared to just 12 per cent in England and Wales overall.
The North East also had the highest share of landlords selling up. Last year 24 per cent of homes sold in the region – just under 10,000 – were sold by a landlord.
Meanwhile 17 per cent or 15,540 of the homes sold in London were previously rented, down from 19 per cent or 18,920 homes in 2019.
Given the smaller gains, only 37 per cent of investors who sold in the North East last year would have paid capital gains tax on their profits.
Any sum less than £12,300 is covered by an annual allowance.
Across England and Wales, 77 per cent of landlords would have paid CGT on their profits.
London landlords, who made the biggest gains, were most likely to have a tax bill to pay, with 91 per cent of investors making a gross gain surpassing the annual CGT allowance.
Investors can offset costs such as stamp duty and renovation expenses from their capital gains tax bill.
Beveridge added: ‘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.
‘The average landlord who owned their buy-to-let for more than 15 years made more than three times more than a landlord who had owned their property for less than five years.’
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