A leading finance expert has claimed that the property tax brought in by the Scottish Government in 2015 has stifled the top end of the property market – leaving would-be sellers forced to rent out their homes.
Sir Timothy Noble, founder of merchant bank the Noble Group and chairman of Spark Energy, said that buyers looking for £1 million-plus homes are moving less as a result of the Land and Buildings Transaction Tax (LBTT) and warned that expensive houses are falling in value.
The tax can see an extra £45,000 added to the cost of a £1m home if the property is bought in Scotland rather than England.
Noble said: “What I predicted has indeed begun to happen. Expensive houses in areas of Edinburgh such as Colinton, The Grange and Barnton have fallen in value by 25 per cent and have become almost unsellable. Perhaps there are one or two other influences causing this, but the property tax is a major element.
“The government yield from the tax has been falling. There have been so many fewer transactions above the £1m level than before, so people are moving less.
“I am aware of several large houses being rented out rather than being sold because the owners were unable to sell at any sensible price. I am also aware of owners being unable to move because they cannot sell their existing house.”
Property experts have previously warned that the high level of taxation on high-end homes in Scotland is stifling the traditional migration of bankers and lawyers who would have moved north of the border from other parts of the UK or abroad.
In a letter to the Scottish Government sent by Noble while the tax was being considered by ministers, he warned that it would be a “double tax”.
He wrote: “The house owner will effectively pay it on selling an existing house (because the buyer will reduce his price in the light of the tax he is required to pay) and then again on buying a different house.”
A Scottish Government spokesman said: “Evidence from both Registers of Scotland and Revenue Scotland shows that sales and revenues in the part of the market between £325,000 and £750,000 are not performing any differently relative to the market under £325,000.
“Indeed, at the top of the market, Registers of Scotland’s recently published data shows the number of transactions above £1m recorded in the first nine months of 2016-17 was 11 per cent higher than in the same period in 2015-16.”
He added: “Our priority for the LBTT is helping first-time buyers enter the property market and assisting people as they progress through the market.”