Concerns have been raised over the impact of 3% Government surcharge on additional residential property which comes into effect today, 01 April.

The real estate industry is understood to be worried on the effect the new initiative will have on the UK's build to rent sector, which currently has over 40,000 new units in the development pipeline.

Previously, the Government indicated it would not extend the SDLT surcharge to institutional purchases, however this pledge was reversed in the Budget.

In contrast, the Scottish Government has decided to exempt institutional transactions.

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The British Property Federation (BPF) estimates that the tax will equate to losing a year's income, based on typical rental yields for a ten to fifteen year investment on build to rent.

The organisation said this will result in investors thinking twice about possible investments.

Over £4 billion has been invested in the sector since the start of 2016, which is delivering 'affordable' high-quality private rented homes at a quicker rate than units built to scale.

However, Ian Fletcher, director of policy (real estate), at the BPF, said investors "will find it difficult to fathom" which such a strong supply of housing is being taxed so highly.

"Given that in many cases the tax will equate to a loss of a year's worth on income, it is unsurprising that many investors are thinking twice about entering the sector," he said.

"As well as the direct financial impact, what we cannot also afford is for this to knock the sector's confidence when there are so many units coming out of the ground and the potential for many more."

(LM)