Why it matters
What Capital Growth means for a landlord
Capital growth and rental yield often pull in opposite directions: high-yield areas tend to see slower price growth, while expensive high-growth areas produce thinner yields. A strategy built purely on capital growth is a bet on the market and is vulnerable to downturns and to the CGT due on sale (18%/24% on residential property). Since Section 24 and higher mortgage rates squeezed rental profit, many landlords now scrutinise whether projected growth actually justifies holding a low-yielding property.
Worked example
How it plays out
Holly buys a flat for £180,000 yielding 7% in a northern town, and her brother buys a London flat for £450,000 yielding 4%. Over ten years his flat rises more in value, but its rent barely covers the mortgage. Which did better depends on the rent, costs, tax and eventual sale price, not on growth alone.
Common mistakes
Where landlords go wrong
- 01Buying on expected growth without checking the property pays its way meanwhile.
- 02Forgetting Capital Gains Tax when estimating the gain.
- 03Assuming past price growth will continue.
What to do
A short checklist
- Model returns with and without growth.
- Include Capital Gains Tax in the exit figures.
- Review whether a low-yielding property still justifies holding.
Sources
Checked against these sources on 16 September 2026. A guide to the rules in England, not legal advice: for a dispute or a possession claim, speak to a solicitor.
