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London buy-to-let profit gain hits average of £248,000

Landlords across England and Wales make average gross gain of £79,770 when selling.

Buy-to-let landlords in London who sold up in 2018 made an average gain of £248,000, underscoring the growth of housing equity in the capital over the past decade.

That compares with landlords across England and Wales who made an average gross gain of £79,770 when selling, according to research from Hamptons International, an estate agent.

The data also illustrate the long-term approach to property investing taken by landlords, particularly during a phase of rampant house price growth in high-value areas such as London and the south-east of England.

On average, landlords in England and Wales selling in 2018 had held a property for 9.6 years, during which prices have risen by an average 30 per cent.

However, the figures also showed that the gains from selling had declined in many places, as house prices fell back. A London landlord selling up in 2018 would have been left with £24,000 less than if they had sold in 2017. The average profit before tax fell in half of ten regions between 2017 and 2018.

Aneisha Beveridge, research director at Hamptons International, warned of likely dwindling capital rewards in future.

“When we look forward we don’t expect house prices to rise as much as we’ve seen in the past,” she said.

Of the landlords who sold up last year, 85 per cent made gains on their sales, with 15 per cent hit by losses. Landlords were most likely to make a profit when selling in London, and least likely to in the north-east of England.

Previous research by Hamptons found a large net sell-off in buy-to-let properties over the past three years. Since 2016 it estimates that nearly 120,000 landlords have sold up and left the industry completely.

The sector’s profitability has been under pressure on multiple fronts, as the government and regulators introduced measures to douse its growth amid worries about an overheated market.

A stamp duty surcharge of 3 percentage points was introduced on buy-to-let properties and second homes in 2016, and tax relief on mortgage interest began to be phased out from 2017. New restrictions on mortgage borrowing have also been brought in for the sector.

The Residential Landlords Association said this month that a quarter of landlords were looking to sell at least one home over the next 12 months, the highest proportion since it began asking the question in regular surveys three years ago.

Estate agents and landlord representatives have warned that a sell-off will push up rents for tenants.

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