More than two-thirds of homebuyers brand the Land and Buildings Property Tax ‘unfair’
One in five potential homebuyers has cited the Scottish Government’s new property tax as a reason for their decision not to move in the past two years, with two-thirds branding it ‘unfair’, according to a new poll. The survey carried out by McEwan Fraser Legal found that 38% of people who considered buying a new property since the Land and Buildings Transaction Tax (LBTT) was introduced in 2015 failed to do so.
A recent survey carried out by McEwan Fraser Legal found that 38% of people who considered buying a new property since the Land and Buildings Transaction Tax (LBTT) was introduced in 2015 failed to do so.
More than half (53%) said the LBTT influenced their decision not to buy with 38% reporting it as the deciding factor.
The LBTT, introduced as a replacement for Stamp Duty, imposes a progressive levy on residential properties of 2% on homes worth more than £145,000 up to 12% on those which sell for more than £750,000.
Responses from potential buyers who had considered purchasing a second home or buy-to-let property in the previous 24 months were even more damning. In addition to the tax, they are charged an additional 3% under the Additional Dwelling Supplement (ADS).
Some 70% said they didn’t go ahead with the purchase with more than half (54%) reporting the LBTT as influencing their decision and 44% saying it was the crucial factor, with similar responses to the ADS.
Last month The Royal Institution of Chartered Surveyors (RICS) said the property market in Scotland was ‘stagnant’ as a result of the tax, with a fall in the number of new instructions.
The Scottish Property Federation (SPF) has calculated that revenues generated by the LBTT in the past year are £57million down on Scottish Government forecasts because of fewer sales.
At McEwan Fraser Legal, we have seen demand for second homes and buy-to-let properties fall by 50%, while sales of high-end properties have also fallen by up to 40%. Particularly hard hit are sellers of more expensive properties due to a ‘virtual stagnation’ at the top end of the market on homes worth more than £1million.
Our Chief Executive, Ken McEwan, said that in light of the survey findings the Scottish Government should carefully consider the detrimental impact the tax is having on the housing market and on reduced tax receipts.
“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,” he said.
“Ministers appear oblivious to the serious problems they have created. The housing market faces a serious slowdown if measures are not taken quickly and I hope they take notice of our survey.”
Between September 9 and 18, McEwan Fraser Legal conducted an email survey of 1062 people who had expressed an interest in buying a property in the past two years.
Of that 68 % said they didn’t think the LBTT was a fair tax, compared with only 15% who thought it was fair. A similar number felt that the band thresholds were unfair compared with only 13% who thought they were set at the right level.
Among those who opted not to buy a property in the past two years, some 84% said they might reconsider if the tax was amended, although 48% said it would depend on the new thresholds.
More than a quarter (28%) said they would consider extending their current homes rather than move, because of the tax.
Among those who had considered buying a second home or buy-to-let property in the previous 24 months, some 70% said they did not go ahead with the purchase.
Of those, more than half (54%) reported the LBTT as influencing their decision with 44% saying it was the crucial factor.
Some 52% said the ADS was also a factor in their decision not to buy with 43% saying it was the most important factor.
More than two-thirds (68%) said they thought the ADS was an unfair tax with half saying it should take account of property bandings. Some 43% said they would reconsider their decision not to buy a second home or a buy-to-let property if the tax did take account of property bandings.