Buy to Let Market Might Collapse

The past months have been characterised by a rapid recovery of the British buy to let market and growth of buyers' confidence. The overall number of new buy to let deals offered by UK lenders increased by 70% in 9 months and reached 304, which is significantly more than 179. The house prices also attracted a great number of buy to let investors.

However, the increase in Capital Gains Tax planned by British Government is expected to ruin the bright recovery of the buy to let sector. As the CGT might be increased to 40-50%, up from 18%, almost all landlords will face enormous tax bills.

Commenting on the possible changes, Mr. Hollingworth of London & Country - UK mortgages brokers - said that buy to let investors are already being cautious even though the CGT has not been risen yet.

Experts at UK investment house Fidelity believe that an increase in CGT can only be fair in case the new government reintroduces indexation allowance. Otherwise, they say, the tax bill will almost double for investors.