It follows hot on the heels of the announcement that the perk of being able to deduct mortgage interest payments from rental income when calculating a property’s taxable profit would disappear in 2017.

The changes came at a time when the buy-to-let market was booming, especially in London. Investment sales were up 71.7% last August, year-on-year, according to researchers Equifax Touchstone, with central London property sales seeing a rise of 112%.

Who is still buying-to-let?

While the rise in stamp duty might put some off investing, there’s still demand for buy-to-let properties.

Here’s who is buying…

• Institutional funds: Sovereign wealth funds are active in the buy-to-let market. They buy completed structures, rather than off-plan, and are focused on yield. But with exemptions for those buying 15 properties or more, or who can prove they are benefiting the local housing market, it might open the door to other forms of investment. Proof they are enhancing the market include the ability to provide investment to redevelop underused buildings.
• Individual investors: Mostly interested in single units, with only around 10% looking to acquire two or three units. If they are buying for children to live in, it depends on the structure of the transaction as to whether they are liable to the higher rate of stamp duty.
• Overseas buyers: There’s been an upturn in Singapore and Hong Kong investors in the £600,000-£1.5m bracket, and Middle Eastern buyers in the £3-£5m market. The combination of global tensions pushing investment to safe havens like London, and the finite amount of private property stock in the capital ensures it remains one of the top three cities to invest in, says Joe Nellis, Professor of Global Economy at the Cranfield School of Management.

Effects of the changes

Rightmove has reported that interest in new purchases from buy-to-let investors decreased by 27% in March compared with the same month in 2015.

But Sam Mitchell, Rightmove's head of lettings, says this could just be a short-term trend with some investors waiting until the tax changes have time to bed in before they review their business and continue to make purchases.

The additional tax payment is likely to be met by increased rents as demand for central London rental property shows no sign of slackening, Henry Kruczko, Associate at Strutt & Parker’s Residential Development Lettings Department believes.

“We’ve been seeing continually high demand from those keen to rent in prime London locations,” he says.

The ability of investors and the London market to adapt to changing financial circumstances is part of a much bigger financial picture.

Joe Nellis adds: “In the broader global context of low inflation, driven by lower oil prices, ensuring little return from government bonds and stagnant stock markets, the London buy-to-let market remains a strong bet for the year ahead.