New tax causes slump in Scottish house prices
07-16-2015
THE impact of the SNP's new property tax was revealed yesterday as house prices suffered their steepest fall since the crippling credit crunch.
By Greg Christison
SLUMP: Only 7,386 house sales in May - 10 per cent down on the previous month
Despite claims that the change would have no detrimental impact, values have fallen by an average of £4,000 and house sales are down.
The Land and Buildings Transaction Tax (LBTT) was implemented on April 1 to replace stamp duty.
The new tax sees buyers pay an escalating rate on different parts of the purchase price. Five per cent is paid on the portion between £250,001 and £325,000 and 10 per cent above that.
It means anyone buying a home worth more than £333,000 is worse off than they would be paying stamp duty.
In the month leading to the change, 84 seven-figure sales were completed as high-end deals were pushed through.
The Scottish Government was warned changes to stamp duty would harm the sector. It ignored those concerns and now we can see the impact of that
Scottish Conservative housing spokesman Alex Johnstone
However, the latest Your Move/Acadata House Price Index shows that the average house price fell by 2.1 per cent - the equivalent of £4,000 - to £180,892 in May.
And, in a further blow, there were just 7,386 house sales in May - 10 per cent down on the previous month.
Just one £1million home was sold in the two months following the introduction of the tax, with house prices overall suffering their greatest decline in six years.
Last night, critics of the LBTT accused the Scottish Government of ignoring repeated warnings that the tax would harm the housing market.
Scottish Conservative housing spokesman Alex Johnstone said: "The Scottish Government was warned changes to stamp duty would harm the sector. It ignored those concerns and now we can see the impact of that.
"In contrast, the UK Government has created a fairer system which will help people onto the housing ladder without penalising everyone else."
Christine Campbell, the Your Move estate agency's managing director in Scotland, said LBTT, coupled with May's general election, had caused "uncertainty" in the market north of the Border.
She added: "Two months into Scotland's new transaction tax regime and the impact of the overhaul is still reverberating around the property market.
"These winds of change have buffeted buyers and sellers and it's harder to make out the underlying course of the market as a result."
Ms Campbell continued: "There is no denying that the recent tax turbulence has affected property prices in the shorter term, with the latest monthly dip testament to further shockwaves of the LBTT, as the market continues to absorb the change.
"May's monthly fall of 2.1 per cent - equal to £4,000 - is the largest backwards step we've experienced for nearly six years."
The most expensive parts of Scotland were worst hit by the slip in property prices with values in Edinburgh falling by 5.7 per cent since April.
A Scottish Government spokesman said: "We are pleased these figures reflect the core strength of the market in Scotland.
"Our residential rates and bands prioritise support for first-time buyers and mean that no tax will be payable on half of all house purchases in Scotland with more than 40,000 home buyers paying less tax than they would under UK stamp duty land tax."
Meanwhile, millions of homeowners are bracing themselves for higher mortgage bills after the Bank of England said an interest rate rise is "moving closer".
Governor Mark Carney said that an increase from the record low of 0.5 per cent is on the cards because of the strength of the UK economy.
"The point at which interest rates rise is moving closer," Mr Carney told MPs.