The coalition Government's Capital Gains Tax (CGT) proposals could force a quarter of landlords to leave the buy-to-let sector, according to LSL Property Services.
Its research revealed 26% of landlords are considering selling their property before changes to CGT are introduced, with an announcement due in the Emergency Budget on 22 June.
A total of 71% of landlords are now reconsidering their future investment in property if the proposed hike goes ahead.
Nine out of ten landlords oppose the Government's proposals.
Despite profitability being determined by a mix of rental income and capital gains, LSL highlighted 36% of landlords consider capital gains to be the most important aspect of property investment.
A quarter of those landlords state they will only consider capital gains when assessing an investment, while just under a third attached equal importance to rent and capital appreciation.
However, of the landlords still committed to the private rental sector, 41% are unable to sell property before the tax is introduced because their property portfolio represents their retirement plan.
Simon Embley, chief executive of LSL Property Services, warns house prices could fall if landlords are discouraged from investing and long-term investors will suffer the most from the proposed changes.
He called for the Government to re-introduce taper relief, which provided an exemption for a percentage of an investor's capital gain depending on how long the asset was held.
Embley says: "The private rental sector is vital to housing the UK's growing population. There is a chronic shortage of residential housing available and this is going to get worse. Social housing will not cover the shortfall. The Government needs to encourage the growth and professionalisation of the sector - not deter it."
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Some 2,000 consumers affected