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Osborne Stamp Duty Charge To 'Raise Rents'

The Chancellor's plans to raise stamp duty rates by 3% for people wanting to buy more than one residential property will raise rental costs and drive down standards, it has been claimed.

The move - announced in the twin Autumn Statement and Spending Review in the Commons - is aimed at helping fund the Government's housebuilding ambitions alongside support for new buyers to tackle a "crisis of home ownership."

The package of measures was welcomed by investors in building firms while the boss of Crest Nicholson, Stephen Stone, told Ian King Live: "To have that longevity of thought ..is probably the first time in my career that we've seen that."

George Osborne told MPs that the additional stamp duty, to be introduced next April, would raise almost £1bn by 2021 - with some of that cash going to help people priced out of home ownership.

It would mean a buy-to-let investor, or someone wanting a second home, having to fork out almost £3,300 more in tax on a property worth £197,000.

That is because the extra tax only kicks in at £40,000.

Properties in Scotland, caravans, mobile homes and houseboats are exempt.

The announcement could spark a rush for properties in the run-up to next April - potentially raising house price values as landlords try to beat the extra tax by boosting their portfolios at a time of already poor supply in the market.

David Cox, managing director of the Association of Residential Letting Agents, said the Chancellor's decision would prove "catastrophic" for the private rental sector following recent changes to mortgage interest tax relief.

"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.

"The changes will also deter new landlords from entering the market, pushing the gap between dwindling supply of available property and growing demand even further apart, which will also – in turn – push up rental costs."

Patricia Mock, the tax director for business services firm Deloitte, said of the stamp duty measure: "This change, coupled with the restriction of interest relief from April 2017, will reduce returns from buy-to let investments and may reduce investment in this sector after April 2016."

One reason for house price growth has been demand outstripping supply - with rents and house price values at record levels .

The stamp duty announcement was among several to affect the building sector.

The construction industry has raised fears that the Government's plans for 400,000 new affordable homes will be at risk from a shortage of skilled labour.

Help To Buy has also been relaxed - with shared ownership restrictions lifted from next April.

Other measures include additional help for people wanting to own a home in London, who will be able to secure an equity loan of up to 40% of the property's cost.