If the Governments proposed new Capital Gains Tax (CGT) hike looks likely to go ahead then 26% of landlords would consider leaving the buy-to-let sector before the changes come into force, according to LSL Property.

CGT is currently at 18% however, the coalition agreement that was set out when the new Government came to power, indicated that they would increase the rate paid on non-business capital gains to a level similar to those applied to income, increasing it to 40% or even 50%.

Nicholas Leeming, commercial director of Zoopla, said: “The new government must be careful over how they structure any changes to Capital Gains Tax regime and when these changes are implemented. Ill thought-out changes risk destabilising the present recovery in the property sector, distorting the market as people change asset classes before new regulations take effect. High CGT rates would be grossly unfair without indexation since people should not be expected to pay tax on general price inflation – the current rate was set low, partly to recognise this fact.

LSL say that nine out of 10 landlords stated that they opposed plans to raise CGT, with 71% of investment landlords indicating that any increases would make them reconsider making future investments in property. They have called for CGT to be overhauled but by reintroducing a taper system, so that landlords/investors who have held assets over the long term do not pay as much tax as those who make quick often speculative gains.

Simon Embley, chief executive of LSL Property Services, said: "Foisting a tax hike on property investors could drive many from the housing market - at a time when its recovery is still perilously fragile. If potential landlords are discouraged from investing, we could see a large proportion of the demand for house purchase disappear and house prices may then fall."