Land and Buildings Transaction Tax update from Ken McEwan

I warned at the time of problems when the new tiered LBTT replaced Stamp Duty.

While correctly predicting a short term boom at the top end of the market I also anticipated a significant downturn for this sector in the period after the changeover.

Now the official Scottish Government statistics clearly demonstrate I was correct in my analysis.

Scottish house prices may have risen 10.3 per cent since May 2014 – twice that of England & Wales – but values have slumped 2.1 per cent in the past month and only one £1m-plus home has been sold in the last 10 weeks.

I said in March the new LBTT  has been ill thought, punitive and would only result in many buyers offering much less for properties at the higher end.

“The tax is hurting home-owners at the top end of the market as banks are unlikely to finance the huge increase in duty and where home owners will be required to find the extra duty no doubt from personal savings which have already been subject to the highest rate of tax.

“I will be very surprised certainly over the next 12 months if the Scottish Government see much if any increase in net revenue from this new tax.”

To have two different property taxes system North and South of the border is ludicrous and only creates confusion and divides the country.

This has been borne out by bitter experience. Now we are well into the new regime the impact of the overhaul is clear to see.

“May’s monthly fall of 2.1 per cent (equal to £4,000) is the largest  for nearly six years; despite the economy improving, an environment of continued low interest rates and an easier climate to borrow money.

“There was a 15 per cent spike in home sales in the immediate run-up to the introduction of the new tax. In contrast, there were just 7,386 sales in May 2015, 10 per cent lower than April levels as activity returns to normal”

And the outlook is not encouraging for higher value homes at the £500K+ level which are not in the most sought after areas, these will ultimately log jam properties down the line.

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