Member Article

Property tax change boosts Scottish home sales

Home sales in Scotland have jumped 11% annually in the first year of LBTT, compared to the twelve months before the tax, accroding to research from Your Move.

However, Your move also claculated that average house prices were down 7.8% year-on-year, due to a lack of higher value home sales. In April, house prices haven’t changed from the previous monnth, despite the new Land and Buldings Transaction Tax surcharge on buy-to-let properties and second homes.

Christine Campbell, Your Move managing director in Scotland, comments: “After a year of the Land and Buildings Transaction Tax (LBTT), it’s now possible to see its impact across the Scottish housing market. By cutting the cost of purchasing cheaper homes, LBTT has led to an 11% increase in sales over the last year. With 104,344 home sales in the last twelve months, the market has outdone the previous year’s 93,601 sales. These figures confirm that lower purchase taxes for property can significantly boost activity in the housing market, while also making it more affordable for first-time buyers to get a foot on the ladder. The Scottish Government should consider lifting the LBTT bands higher, if they want to build on the foundations of this policy, in order to support Scotland’s fragile property and construction sector.

“However, house prices are still down 7.8% year-on-year in April, with a typical home in Scotland now worth £170,667. In part, this drop in property values was caused by a spike in high value home sales last year, before the LBTT was introduced, but today’s market hasn’t regained those losses yet. The facts show that since the introduction of LBTT, growth in house prices has been subdued. The average property value in Scotland has only grown 1.74% in the last six months, compared to 3.19% for England and Wales over the same period. The tax has particularly hit homes at the top of the market, as these properties have become more expensive to buy after the introduction of LBTT. So while there has been an upswing in sales, it has come at a cost for some.

“Most recently, despite the new LBTT surcharge adding an extra 3% to the cost of second-homes and buy-to-let properties, house prices have remained stable from last month. But for the number of home sales, the impact of the latest tax is clearer. While sales in March were almost double those in February, sales in April are 66% down on the previous month. However, home sales for the first four months of the year are still well ahead on the same point in 2015, with 4,751 additional property purchases so far in 2016.

“When you look at the local picture, the negative effects of the new surcharge are more obvious, as average house prices have dropped in 20 of Scotland’s 32 local authority areas from the previous month. Moray has felt the worst of the tax hike in April, with property values in the area declining by 4.6% month-on-month. But the picture isn’t so bleak in other parts of Scotland. Edinburgh has seen house prices rise by 3.7% from March, while Clackmannanshire has had the highest month-on-month growth in Scotland, with local property values increasing 5.9%. House prices here have been boosted by more high value home sales near Dollar.

“A potential drop in demand from second-home and buy-to-let buyers after the surcharge and the uncertainty surrounding the EU referendum may continue to hinder the Scottish market, as they have done south of the border. But in Scotland these challenges add a new storm to an already rough sea.”

Click here to read the full Your Move house price report.

This was posted in Bdaily's Members' News section by Property Editor .