Government plans to raise the inheritance tax (IHT) allowance could inflate the housing market by putting greater restrictions on the supply of property, experts have warned.
In his summer Budget, George Osborne confirmed that from 2017, families will be able to inherit property worth up to £1 million without paying IHT.
But Jonathan Hopper, managing director of Garrington Property Finders, said: “Although this is good news for homeowners and families, it's bad news for a property market short on supply. New housing stock levels remains perilously low, and increasing the inheritance tax threshold could actually stifle the supply of properties coming onto the market.
"By increasing the threshold, you could see properties remaining in the family, and being rented out, or lived in, rather than sold to pay the tax bill.
"The knock-on effect could be even less housing stock coming onto the market, and that could put further upward pressure on property prices."
Liam Bailey, global head of research at Knight Frank, said: “The tapering of the IHT bands upwards over the coming years mean that some may be tempted to sit tight in their home until they can downsize and retain the maximum housing IHT allowance, creating short-term stickiness in this market.”