The Scottish government’s controversial property tax is “strangling” house sales in Edinburgh and beyond, it has been claimed.
Estate agents warn that the land and buildings transaction tax (LBTT), introduced by the SNP in 2015, is deterring homeowners from selling because they stand to lose a substantial chunk of equity to the tax if they buy a new property.
Elderly homeowners, in particular, are said to be a chokepoint in the market because fewer who live in prime residential properties are opting to move to a smaller home.
“We’re seeing pensioners who might otherwise have downsized deciding to stay put,” said Ben Fox, head of residential sales in Edinburgh at Savills. “It’s a constricted market. My sense is that overall stock levels are at their lowest since LBTT was introduced.”
Galbraith, a leading estate agents in Scotland, said potential buyers are making lower offers to compensate for the cost of the LBTT and that houses are taking “a long time to sell”, in turn discouraging others from placing properies on the market.
Advertisement
The disparity between LBTT in Scotland and stamp duty south of the border — particularly at the prime end of the market — continues to fuel concern.
Homeowners buying a house for more than £600,000 in Scotland will pay 66% more tax than they would in the rest of the UK. This divergence becomes more acute as house prices rise.
Last night, the Scottish government said claims that LBTT is damaging the property market “are not supported by the evidence”. A spokesman pointed to data from the Royal Institution of Chartered Surveyors suggesting that the performance of the Scottish housing market compares favourably to the rest of the UK across a range of measures. He added: “In addition, official data from Revenue Scotland shows that total residential transactions in the 12 months to November 2017 were up by an annual 4%, while growth in the £325,000 to £750,000 price bracket was even higher at 18%.”
According to Galbraith, however, recent sales across Scotland show that sellers are being forced to accept offers significantly lower than the market valuation. In Thornhill, Dumfries and Galloway, sellers of a house valued at £610,000 accepted an offer of £575,000 but were forced to reduce further, to £533,500 when the purchasers realised the tax burden, which they could not afford.
In Dalgety Bay, Fife, a “lovely” house was poised to sell within a week for £480,000 until the buyer heard that LBTT was about £22,000, which caused her to withdraw her offer. The property then took 18 months to sell.
Advertisement
Simon Brown, head of the rural and residential sales team at Galbraith, said: “Since the introduction of LBTT, sales across Scotland have slowed down significantly and homeowners are choosing to stay put rather than move house. Having a different system of stamp duty in Scotland doesn’t make sense. English buyers used to buy property all over Scotland, but are now reluctant to do so.”