Scottish house prices increase at twice English rate
05-27-2015
Property market experts said a stampede of deals to avoid the SNP's replacement for stamp duty helped drive up prices by more than 11 per cent.
Scottish house prices are increasing at a faster rate than in London Photo: Kirsty Wigglesworth/AP
By Simon Johnson, Scottish Political Editor
House prices have skyrocketed in Scotland at twice the rate of England partly thanks to a stampede from buyers to avoid the SNP’s new tax on purchasing a home, according to new figures.
The average price of a property north of the Border has increased by 11.2 per cent over the past 12 months compared to only 5.7 per cent south of the Border, according to the latest house price index from Your Move/Acadata.
Prices rose by 5.4 per cent in March alone, ahead of the April introduction of the SNP’s Land and Buildings Transaction Tax (LBTT), with a record 36 properties worth more than £1 million changing hands.
The figures emerged as SNP ministers admitted that their Help to Buy scheme to help people move up the property ladder has nearly run out of money already.
Scotland’s house builders attacked the SNP Government for failing to allocate enough funding to the shared equity scheme and said the result would be the industry and buyers being placed at a “significant disadvantage to those south of the Border”.
Under LBTT, purchasers pay an escalating rate on different tranches of the purchase price, with five per cent paid on the section between £250,001 and £325,000 and 10 per cent above that. This means anyone buying a home worth more than £333,000 is worse off compared to stamp duty.
Families buying a £500,000 home must pay £8,350 more, with the tax bill increasing by £20,850 for those buying a £750,000 home. Those buying a £1 million property pay £34,600 more.
Christine Campbell, regional managing director of Your Move, said: "In what would have been an unimaginable trend just a year ago, house prices are now rising faster in Scotland than in London.
"In part this is due to a short-term scramble to avoid the new Land and Buildings Transaction Tax. For the top of the market especially, a pre-deadline rush has boosted the average price paid in March, so the latest surge in prices is unlikely to be sustained to quite the same extent in April under the new regime.”
Estate agents and the Tories have warned LBTT risks penalising middle-class families and discourage businesses from investing in Scotland because it is a high-tax environment.
John Swinney has admitted that the levy – the first tax set by a Scottish Finance Minister in more than 300 years – may not raise what he originally predicted because of the behavioural response of buyers wanting to avoid it.
In Edinburgh, prices jumped by £27,240 – more than 10 per cent – within a few weeks, going from under £250,000 in February to £276,636 in March. Neighbouring East Lothian saw the biggest monthly price surge in percentage terms, up 11.8 per cent.
Margaret Burgess, the Scottish Housing Minister, yesterday admitted the £100 million allocated to the Help to Buy programme for large builders north of the Border has almost been used up barely two months into the new financial year.
First-time buyers need just a five per cent deposit to get a mortgage under the scheme, while existing home owners can use it to trade up to a larger property. It has helped more than 7,500 buyers so far.
Philip Hogg, its chief executive, said: “With no details or firm commitment on any future support forthcoming, buyers and builders here are now at significant disadvantage to those south of the border and face months of uncertainty whilst the Scottish Government decides whether or not to launch a successor scheme.
“This is the worst possible outcome, threatening any industry recovery that may be under way with the implications for jobs that this brings.” In contrast George Osborne has set aside £6 billion to extend the scheme up to 2020 in England.
Alex Johnstone, Scottish Tory housing spokesman, said: “All the lip service in the world cannot disguise the plain fact that this SNP government is home ownership averse.”