Yesterday, we read in an article in Scottish Legal News that stated that the Scottish Conservatives have warned the new Finance Secretary Keith Brown that Lands and Buildings Transactions Tax (LBTT) rates must be reduced to avoid “virtual stagnation” at the top end of the market. The article went on to report that the Shadow Finance Secretary Murdo Fraser MSP had said “that sluggish activity in the market for homes above £500,000 has cost the Scottish Government £30 million in lost revenue and argued the rate must be cut.”
This outcome, was exactly what was predicted by our CEO, Ken McEwan in our previous blog (Buy-to-Let Landlords Exit the Property Market Due to the New Additional Dwelling Supplement).
As projected by Ken back in March 2016, “Scottish Government are in for a shock as I predict demand in the first year for second homes and buy-to-let properties could reduce by up to 50%. Many people believe that this additional tax is only designed to achieve increased tax receipts and has little to do with helping first time buyers compete with buy-to-let investors. I would be very surprised if the new tax receipts exceed £10m – £15million.”
The article continued by saying that “the warning follows previous intimations to former Finance Secretary John Swinney, who was behind the introduction of the legislation earlier this year, that setting the rate too high for more expensive properties would be highly detrimental to the market in Scotland.
Now the party has said that the housing market for larger properties in many parts of Scotland has stagnated.”
Therefore, Ken was bang on with his prediction. Although they had the opportunity to wait and see the extent of the problems this new LBTT tax may have in England and Wales instead of rushing through this ill-conceived legislation. This was ignored. Also, Mr Swinney had been warned continuously that he was setting the rates too high on the expensive properties and advised that the consequences of this would cause a slowdown in the property market of the high end properties, and a decline in tax revenues. Instead, Mr Swinney refused to listen and carried on regardless.
It is our view that if the new Finance Secretary wants the property market to rise he will need to revise this tax after reviewing the evidence the impact of the new LBTT rate is having on the housing market. Even with a small change, this could prevent further stagnation and bring in much needed tax revenue to the market.
For now, we will have to wait for additional announcements on the LBTT rates and see how the end of the second half of 2016 property market looks like when the impact of the government legislation has filtered through.
Source: Scottish Legal News