An increase in Capital Gains Tax (CGT) could cause problems in the residential property market recovery and restrict the private sector’s delivery of high-standard rental housing, according to Ludlow Thompson.

There have been rumours of an increase to CGT in the next budget on 24 th March 2010 and buy-to-let investors fear a steep rise on the existing rate of 18% either at the next Budget or after the election, and it could dissuade them from investing.

Stephen Ludlow, director of Ludlow Thompson, said: “It is no exaggeration to say that buy-to-let investors have helped prevent the housing market from going into a post Lehman Brothers tailspin that would have dragged the rest of the economy down.

“Whilst it is understandable that the Treasury wants to address its shortfall by increasing taxes this must be balanced against how much strain the residential property market has been under during the last 18 months. The recovery has been fragile. Increase CGT and buy-to-let investment becomes much less attractive.”

Ludlow explained that continued investment into the buy-to-let market will be vital if the UK is to continue to improve the standard of the rental stock. The buy-to-let residential market has housed over one million people in the last ten years. However, the social housing sector is likely to come under budgetary pressure over the next five years and that the buy-to-let market will have to continue its role of attracting private money into the upgrading of the rental stock.