FEARS are growing that an overhaul of the tax rules for buy-to-let investors and second-home owners could lead to a surge of selling in April, sending precarious property prices tumbling.

An estimated 650,000 people with buy-to-lets and second homes will see their tax bill fall significantly if the government’s plan to introduce a flat 18% capital-gains tax (CGT) gets the green light.

Although the government is expected to tweak its tax plans in the new year in response to fierce lobbying by business leaders, the proposals for property owners are expected to remain unchanged.

Second-home and buy-to-let owners will save an average of more than £6,000 by selling under the new regime as their lowest CGT rate drops from 24% to 18%.

This has sparked concerns that some landlords, struggling to cover borrowing costs and worried about falling house prices, will rush to sell when the more attractive tax regime takes effect. This could spell trouble at a time when the housing market is expected to be exceedingly weak.

Steve Smith at Andersen Charnley, a wealth manager, said: “The government’s intention to reduce CGT could cause a false market in which fewer buy-to-lets are marketed before April but then there is a rush to sell.

“It is the flipside of 1988, when a false market was created by [chancellor] Nigel Lawson’s decision to end tax relief on mortgage interest. This led to a rush to buy homes before the perk was scrapped and resulted in the property crash.” Estate agents have reported more landlords running into trouble because they can’t find tenants, or because interest-rate rises mean their rental income no longer covers their mortgage repayments.

The average rental yield – the rent expressed as a percentage of the value of the property – has slumped to just 3% after tax. This means many are losing money once mortgage payments and maintenance costs are taken into account.

Until recently, property investors were willing to shoulder these costs because they expected to make money from capital growth. But with the housing market looking shaky thousands are believed to be looking to exit the market.

Simon Rubinsohn, economist at the Royal Institution of Chartered Surveyors, said: “I don’t think we are on the edge of a complete bailout, but some landlords are looking to sell. We could see a pickup in properties coming to the market in April, although I think most buy-to-let investors are still committed for the long term.” If you need to sell, you could defer paying CGT at the higher rate in force now by rolling profits into an enterprise investment scheme (EIS).

The CGT must be paid eventually, but if you sell your EIS shares over several years, using your CGT allowance each time, you may be able to avoid the tax or at least get the lower rate.