PROPERTY prices have fallen following the introduction of a new Scottish property tax that changes the way buyers pay duty on house purchases.
Figures released today by the Edinburgh Solicitors’ Property Centre (ESPC) reveal average property prices in east central Scotland fell by a half percentage between April and June 2015, when compared with the same period last year.
The property firm said this is in contrast to the 18 per cent year on year rise seen in their April report.
The latest report says this could be explained by the surge in higher-priced properties brought to market at the start of the year due to the introduction of the land and buildings transaction tax (LBTT).
LBTT replaced the UK stamp duty under new devolved powers using a graduated tax similar to income tax. It means properties worth up to £145,000 do not pay tax.
A tax rate of 2 per cent applies to sales between £145,000 and £250,000. The tax band for properties between £250,001 and £325,000 is 5 per cent, rising to 10 per cent for those between £325,001 and £750,000. All transactions above £750,000 are in the 12 per cent LBTT band rate.
Fewer homes are being brought to market, with a decrease of 5.6 per cent compared with last year.
However, conditions are still more favourable to the seller as more homes are being sold, with an increase by 6.9 per cent, compared with that period last year.
Various property sources across Scotland are reporting that the introduction of LBTT across Scotland has led to a spike and then a fall back of sales, with wide variations in prices across Scotland.
However, Fasial Choudhry, head of research in Scotland for Savills, who has researched the tax in depth, said: “The problem is that LBTT relies on a small section of the market to generate the vast majority of its income.
“It is 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 said his research showed that 55 per cent of LBTT revenue was generated from Edinburgh, Aberdeen and the Aberdeenshire area.
Maria Botha-Lopez, business analyst for ESPC said: “We’re continuing to see the impact of the introduction of 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 per cent 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.”