Thousands of people will rush to complete the purchases of buy-to-let properties ahead of the stamp duty hike next year after warnings it could decrease property prices and push up rents.
In his Autumn Statement on 25th November, Chancellor George Osbourne announced that stamp duty on buy-to-let properties and second homes will rise by three per cent.
However, this rise has been condemned by the Institute of Fiscal Studies (IFS) which stated there would a rush for buy-to-let properties before the new tax comes into force.
The Institute described the stamp duty hike as unjustified and suggested landlords are likely to pass the costs onto tenants in the form of higher rents.
IFS senior research economist Stuart Adams said that properties will be worth less because potential landlords and potential homeowners won't be willing to pay as much for them.
"If property developers don’t feel they’re going to get as much for them, then there’s less incentive to develop it,” he said.
"Thinking about the longer-term effect, at the margin the policy is likely to raise owner-occupation rates.
"It will make rental properties and second homes more expensive and therefore discourage the purchase of properties for that purpose.
"It may well also reduce house prices and might also increase rents if it feeds through."
It is estimated that more than 50,000 people could attempt to complete buy-to-let purchases before the higher rate of stamp duty kicks in.
Gemma Tetlow, programme director at the IFS, said: "There are a number of ways you can get round this whole policy. What about the case where I buy a property, live in it for a little while but then choose to let it out?”
The Office for Budget Responsibility said that the move will reduce the number of property sales by three per cent next year, and two per cent for each of the next four years.