“Punitive” rates of land and buildings transaction tax (LBTT) are curtailing the million pound market in Scotland, property experts have warned.
Only 56 transactions have taken place in the first half of 2017, compared to 79 during the same six-month period last year, according to an analysis from estate agent Savills. While Edinburgh remains the hub of the million pound market, sales of high-end homes are spreading more evenly throughout the country, the study found, especially in the west of Scotland.
A separate study found that one in five potential homebuyers across the market has cited the tax as a reason for their decision not to move in the past two years, with two thirds branding it “unfair”. The tax, introduced by the Scottish Government in April 2015, can see an extra £45,000 added to the cost of a £1m home if the property is bought in Scotland rather than England. Property professionals warned in advance of its introduction that it could impact the higher end of the market and the Scottish Government is coming under increasing pressure to reconsider the measure.
Ken McEwan, chief executive of estate agent McEwan Fraser, said that in light of the survey findings the Scottish Government should consider carefully the detrimental impact the tax is having on the housing market and on reduced tax receipts. The Scottish Property Federation (SPF) has calculated that revenues generated by the LBTT in the past year are £57 million down on Scottish Government forecasts because of fewer sales.
“If stagnation happens at any part of the housing market, it has a knock on effect all the way back to first-time buyer properties – precisely those the tax was intended to help,” Mr McEwan said.
The Savills report revealed that Edinburgh has seen a drop in million-pound plus transactions over the first half of this year, with 33 in the first six months of 2017 compared to 45 last year.
However, greater Glasgow’s million pound market has had a stronger 12 months, with 28 annual transactions taking place during the year ending June 2017 compared to 20 during the year ending June 2016.
A Scottish Government spokesman said: “The official data clearly shows that property sales in the highest tax brackets are maintaining their share of overall property transactions.”