Upmarket house buys soar ahead of property tax

Edinburgh's Coates Crescent, where one house was recently bought for �1.3 million. Picture: Neil Hanna

Edinburgh's Coates Crescent, where one house was recently bought for �1.3 million. Picture: Neil Hanna

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ESTATE agents in Edinburgh have reported their busiest few weeks of trade in nearly a decade, with one selling more than a dozen upmarket properties in the space of three weeks as well-heeled buyers rushed to beat the deadline for a new property tax.

Strutt & Parker said it sold some 14 properties worth £330,000 or more over the course of March, ahead of yesterday’s introduction of the land and building transaction tax (LBTT).

As of 1 April, buying a property worth that or more is made more expensive compared to the costs of traditional stamp duty.

It meant that a wave of well-off buyers exchanged title deeds ahead of the deadline, with some of them saving around £40,000 in the process.

LBTT replaces UK stamp duty under new devolved powers contained in the Scotland Act 2012. Under the new set up, no tax is paid on properties worth up to £145,000. For sales between £145,000 and £250,000, a rate of 2 per cent will be applied, with 5 per cent charged for properties valued between £250,001 and £325,000. Between £325,001 and £750,000, the marginal rate will be 10 per cent, with a top rate of 12 per cent applying to all transactions above £750,000.

Strutt & Parker said 14 properties above the threshold went from under offer to completion in three weeks. Four of the homes were worth more than £1m.

A four-bedroom, luxury townhouse in Coates Crescent in the city’s west end had a guide price of £1.3m.

By completing the purchase before Wednesday the buyers paid around £73,750 in stamp duty rather than £114,350 under the new LBTT.

Blair Stewart, a partner specialising in residential property at Strutt & Parker’s Edinburgh office, said: “It’s the busiest time since 2007. Since before the credit crunch we haven’t seen this type of activity.”

Mr Stewart said the 14 properties sold had an average price of £750,000, saving the buyers an average of £21,000.

Peter Lyell, head of Edinburgh residential at Savills, said they had sold “twice as many houses” in the first quarter of this year than last. The start of this week, he said, had been “complete chaos,” as the LBTT deadline neared

“A lot of it is very last minute,” he added. “A lot of it is going to the wire. A lot of paperwork has been done.”

Adam Gillingham, an Edinburgh property lawyer at Turcan Connell, said one customer had saved £20,000 by beating the deadline. He added: “We’ve seen a rush up until last night of people buying and selling at the higher end to get the purchase at the old rate.”

A £500,000 property will now incur a tax liability of £23,350 compared to that of £15,000 at the start of the week, a difference of £8,350. A £1m property will now incur a cost of £78,350 compared to £43,750 previously making a difference of £34,600.

If the new tax had been in place last year, Scots would have had to shell out £30m more than those south of the border.

The Scottish Government claims nine out of ten taxpayers will be better or no worse off under the new system, but Scottish Conservative leader Ruth Davidson described it as a “tax grab” on Scottish buyers.

In 2014, £193.8 million would have been generated from LBTT while under the UK Government’s new stamp duty rules the figure would have stood at £164.6 million.

John Swinney, the finance secretary, said yesterday that an online system set up to collect the proceeds from LBTT – the first national taxes introduced by a Scottish Parliament in more than 300 years – has successfully began processing transactions.

There were fears that the collection system, administered by the new tax authority Revenue Scotland, would not be ready on time, but Mr Swinney told MSPs that as of about 1:45pm, 83 transactions had already been processed online.

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