Results coming in for the new property tax

Your Move are among the first organisations to publish statistics on the effect of Land and Buildings Transaction Tax on average house prices in Scotland post March this year with a modest drop in average prices and an eye-watering decline in transactions at the top end of the market.

It is a strange time for Scottish property; not only have we had a referendum and an election in the last year, but a major shake up of the system of property taxation, with first the UK government reforming stamp duty, only for the Scottish government to announce their own changes - twice.

While all of these are certainly having their effects on the health of the residential market North of the border, it is difficult to know which way the wind is blowing.

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The changes in taxation mean that we may not be able to see what is really going on for some months, although these early figures can start to give an indication.

Your Move’s statistics show that the selling prices in Scotland reported an average £3000 drop, or 1.6 per cent, in April, which they say is the largest monthly drop since 2009.

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Of course this comes as the other side of the coin to the initial Land and Building Transaction Tax effect - which saw average prices rise more in Scotland than anywhere else in the UK in March - with some figures reporting a 15 or 16 per cent hike.

Of course, such figures were skewed by the rush for higher priced homes to complete before the 1 April taxation deadline.

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What is perhaps more interesting than the fall and rise in average prices, and certainly more stark, is the number of high value homes sold in March compared to April. In the month leading up to the introductino of LBTT, Your Move report 83 homes were sold in the million plus price bracket in Scotland.

In April, after LBTT was introduced, they report no sales whatsoever.

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It is an alarming statistic in some ways, although it certainly shows the efficiency of Scottish conveyancing, at least when dealing with million pound transactions and and an extra tens of thousands of pounds as the price for getting it wrong.

I have to confess that the devil in me hoped that there might be one high profile sale that just missed the deadline; a lone transaction which completed on the morning of 1 of April - meaning a tax bill on the purchase of a million pound home rising from George Osborne’s tax of £43,750 to John Swinney’s £78,350 overnight.

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It would be a brave solicitor who billed for their full fee if that were the case.

House purchase is stressful at the best of times - so even with those £1m property buyers who may well be able to easily afford the higher rate of tax, I couldn’t be mean enough to wish a last minute fail on others.

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Speaking to estate agents and experts in the property industry, this slump in values and transactions is likely to be temporary.

Most think that it is just a result of the traditional Spring market of April, May and June having already happened this year, in that very busy period for expensive properties in February and March to beat the tax.

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After a period of readjustment to LBTT, most also agree that we will see the market progressing along a steady incline as the recovery from the recession continues. But critics of the Scottish Government’s replacement of stamp duty think there might be unseen consequences, including, some predict, prices at the top end reducing substantially because of the hike in taxes.

The Scottish government have given an assurance that this will be a revenue neutral tax change but if introducing it causes fewer homes at the top end to be sold, and those that are for lower prices, it will mean a net loss to the tax man, and the thresholds might need to be revisited.

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Some think that a tax bill of many tens of thousands on the more expensive city homes - a four bedroom in The Grange for example - will see people staying put and spending the money on extending and improving where possible, and adding value to their property rather than handing it over to the government.

What is certain is that those self appointed experts who reported - on the back of the sales figures of February and March - that Scotland had overtaken London as the new place to invest in bricks and mortar if you wanted to get good returns, might stay very quiet for the next few months.