New Property Tax Sends Scottish House Prices Down
Property prices in Scotland have started falling after a new tax was introduced that changes the way buyers pay duty when they buy houses.
Figures released this week by the Edinburgh Solicitors’ Property Centre indicate that the average price of property in East Central Scotland fell by 0.5% between April and June 2015, compared to the same period last year.
The property firm stated that this in contrast to the substantial 18% year on year rise seen in their April report. The latest report states that the unexpected drop in value could be due to the surge in the higher-priced properties brought to the market at the start of the year due to the introduction of the Land and Building Transaction Tax (LBTT).
The LBTT replaced UK stamp duty under the latest devolved powers using a graduated tax similar to income tax meaning that the amount of tax paid is more proportionate to the actual price of the property. The percentage rate for each band in LBTT is applied only to the part of the price over the relevant threshold and up to the next threshold.
If the sale price of the property is between £145,000 and £250,000 then a tax rate of 2% applies. This increases to 5% for properties between £250,001 and £325,000 and 10% for properties between £325,001 and £750,000. All transactions above £750,000 are in the 12% tax band. This essentially means that property worth up to £145,000 is exempt from paying any tax.
It is believed that fewer homes are being brought to the market and there is currently a decrease of 5.6% compared with last year. However, market conditions are still more favourable to the seller as more homes are currently being sold at an increase of 6.9% on the previous year.
It is being reported in various sources that the introduction of LBTT across Scotland has caused a spike and then a decrease in property sales.
However, Fasial Choudhry, head of research in Scotland for Savills, who has looked into the new tax in detail, claimed: “The problem is that LBTT relies on a small section of the market to generate the vast majority of its incomes. It’s too punitive and is going to affect those aspirational people trying to buy family houses in core areas such as Edinburgh. However, the mainstream market is going to benefit and see no or little difference.”
Mr Choudhry claimed that his research indicated that 55% of LBTT revenue was generated from Edinburgh, Aberdeen and then Aberdeenshire area.
Maria Botha-Lopez, a business analyst for ESPC added: “We’re continuing to see the impact of the introduction of the LBTT on the regional property market as average property prices have fallen in the period of April to June 2015, after LBTT was implemented on 1st April.
“A surge in average property prices in the first quarter was driven by larger volumes of high-end property sales, and now we are seeing a decrease in average property price driven by smaller volumes of high-end property sales in the second quarter.
“By comparing the first six months of this year against the same period last year we see a 9% growth in average property prices, which looks like we have a better chance of balancing out the waxing and waning of the LBTT effect on property prices.”
She added: “It will be interesting to see whether this effect will taper out in the coming months.”
If you are in Scotland, or anywhere else in the UK for that matter, and are concerned at the prospect of your home losing value then National Homebuyers have the ideal solution for you. We are more than aware that the market is turbulent to say the least during this time and that property often ends up sitting on the market for months, sometimes even years. Now that we have seen house prices start to drop in the UK, why take the risk of your home depreciating in value?
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