Apocalypse Now?

Are we facing a property crash?  The extract from a recent article seems to be putting it that way. 

Proposals to hike Capital Gains Tax could devastate both the house sales market and the private rented sector, a leading figure has warned. He said rental supply would fall and the number of purchasers would collapse.

Meanwhile, auctioneers are anticipating a flurry of instructions as investors rush to beat the rise.

Simon Embley, chief executive of LSL, was outspoken in warning  that foisting a CGT hike on investors would have a severe impact.

According to a new survey by his firm, it would force more than a quarter of property investors to leave the rental market, while nearly three-quarters might not invest in property again.

The group, which owns Your Move and Reeds Rains, found that 26% of landlords will consider selling up before the higher rate is introduced. Nine out of ten oppose plans to raise the level, and 71% said that an increase in CGT will make them reconsider future investment in property.

Although the profitability of property investment is determined by a combination of rental income and capital gains, landlords surveyed place greater importance on capital growth.

While 30% of landlords give equal importance to rent and capital appreciation, 36% of respondents consider capital gains more important aspect. A quarter state that they only consider the likelihood of capital gains when judging an investment.

Simon Embley, CEO of LSL, said: “Over the past two years, investment properties have accounted for 30% of sales across our network – over 40,000 transactions. Foisting a tax hike on property investors will drive many from the housing market at a time when its recovery is still perilously fragile.

“If potential landlords are discouraged from investing, we will see a large proportion of the demand for house purchase disappear, and house prices may fall. A further fall in house prices will see more home owners in negative equity, potentially triggering a significant rise in repossessions as owners lose confidence in the market.”
 

I am sorry if this is difficult reading but the proposed increase in CGT and the lack of lending seems (if you believe what you read) to be forming a "perfect storm" where the availability of new properties in the rental sector will dry up completely.  It is an apocolyptic view and is hopefully a worst case scenario, but we are seeing a drastic reduction in available stock, and this will have an upward pressure on rental values in the lomg term. 

I was once told "There is no such thing as problems only opportunities"  So is this an opportunity to get into the market?  Will lack of availability and rising rents encourage you to get into the market?  Does the proposed CGT hike put you off.  I would love to hear your views on this.