New tax sees sharp fall in Scottish house prices

House prices suffered their sharpest monthly drop in six years last month following the introduction of a new tax, a report has found.

Average prices fell 1.6 per cent in April, the sharpest fall since March 2009. Picture: PA

Average prices fell 1.6 per cent in April - equal to £3,000 - to £184,970, the largest monthly fall since March 2009 according to the Your Move/Acadata House Price Index for April.

It came after a “high-octane performance” in the Scottish housing market in March as high-end buyers rushed to complete expensive purchases under the old stamp-duty rates ahead of the introduction of the new land and buildings transaction tax (LBTT) in April.

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In total, 83 properties worth £1 million or more were sold in March, compared to 12 in a typical month, with 46 of them changing hands in the three days running up to the introduction of LBTT on April 1.

No properties were sold for more than £1 million in April.

Christine Campbell, Your Move managing director in Scotland, said: “Reforming Scottish stamp duty was always going to ruffle a few feathers in the market.

“After a spectacular 9.4 per cent leap during March ahead of the new land and buildings transaction tax (LBTT), average Scottish house prices subsequently fell 1.6 per cent in April - equal to £3,000.

“This is the sharpest fall we’ve seen since March 2009 when the housing market was at the lowest ebb of the housing crisis.

“The Scottish housing market put on a high-octane performance in March as high-end buyers raced against the clock to snap up million-pound property before the higher rates of stamp duty came into play.”

She added: “This jet stream of high-value purchases magnified the average price paid in March but now the market is re-focusing under the lens of the new tax regime - and in contrast there were no property sales over £1 million in the month of April.”

She said that the “high-end freeze” also cooled annual growth, which slipped from 16.3 per cent in March to 14.6 per cent in April.

The report found that Orkney, the Western Isles and Shetland weathered the stamp-duty disruption on the mainland and saw the highest price increases during the month, of 9.1 per cent, 4.8 per cent and 4.4 per cent respectively.

Property values also reached a new peak in the Scottish Borders, Highlands, and West Dunbartonshire in April.

The area with the largest fall in average prices in the month was East Lothian, down 7.2 per cent.

There were 8,203 home sales in Scotland during April, jumping 18 per cent on the previous month and also 4 per cent higher than a year ago.

Overall, Scottish sales in both March and April have grown on 2014 levels - bucking the trend witnessed across England and Wales, where sales have been consistently falling behind on a yearly basis over the past six months.

The report said that the majority of Scottish buyers - those purchasing property for under £254,000 - will benefit from lower tax costs, so the momentum in the market should continue into the summer, even if prices are reined in over the short-term by a slower top-end, until they adjust to the new banding.