While there was a lot to be positive about for the property market in the aftermath of chancellor George Osborne's Autumn Statement and Spending Review, one sector of the market has reacted angrily to a new charge that is set to be imposed.
On Wednesday (November 25th), Mr Osborne announced that those investing in buy-to-let property, one of the most vibrant and popular asset classes in the UK at present, will have to pay a three per cent surcharge on their stamp duty when buying homes to let out.
Calculating this three per cent on top of the standard charge will net the Treasury an estimated £880 million over the course of the next four years, but there's a fear that it will chase smaller independent landlords away from the market. Corporate investors are exempt from the surcharge, but those who have simply seen buy-to-let as a way to give themselves a boost in their income or future earnings will potentially be priced out of the market by this charge.
Experts have even said that this change, which will come into effect in April of 2016, could also spark a sharp rise in house prices. There's no mistaking just how well buy-to-let performs for landlords at the moment, and many may now look to purchase and extend their portfolios before the charge comes in.
Any sudden rise in demand like this could present real problems for the market, forcing prices up sharply as competition between potential investors creates a bidding war.
David Cox, managing director of the Association of Residential Letting Agent (ARLA), described the move as a 'catastrophe' for the market as a whole, saying that a rise in house prices would hurt everyone in the rental sector.
"Increasing tax for landlords will increase rents and reduce property standards for tenants. To make owning a buy-to-let property financially viable, landlords will need to pass on the increased stamp duty costs to tenants, who will in turn see less spent on maintaining their property and of course see increased rents," he explained.
He also went on to say that the change will deter more landlords from entering the market, which would be a real negative at a time when there is a need for growing investment to help meet levels of demand in the sector.
Adam Challis, head of residential Research at JLL, was similarly scathing in his analysis of the chancellor's policy, saying: "This government's narrow focus on home ownership is a serious concern however. Support for the private rented sector and social housing is vital to protect the financial stability of millions of households, for whom ownership is beyond reach.
"The private rented sector is the fastest growing tenure in the UK and deserves direct support through the planning system and through the release of public land."