Capital gains tax rise 'will deter' PRS investment

Date: 21st June 2010

An increase in capital gains tax (CGT) in this week's emergency Budget will starve the UK's private rented sector (PRS) of "much needed" investment.

This is the view of the Royal Institute of Chartered Surveyors (Rics), which has called on the coalition government to introduce a "taper relief" for investors based on the length of time a buy-to-let property has been owned.

The latest Rics housing market survey revealed that 72 per cent of chartered surveyors believe that a rise in CGT would deter investors from entering the PRS.

Rics has urged the government to avoid a "slash and burn approach" to asset cuts and called for more strategic, sustainable and focused measures.

Simon Rubinsohn, Rics chief economist, said: "Our research indicates that an increase in the rate of CGT is likely to deter new investors from entering the buy-to-let market, at a time of acute shortage of affordable accommodation.

"And while it is unlikely that there will be a near term glut of supply, a "fire sale" of properties by landlords looking to avoid a higher rate of CGT could, if it were to materialise, have a significant impact on the fragile improvement in sentiment in the residential sector."

Posted by Jacob Williams