A slowdown in house sales at the middle and upper end of the market is set to have an impact on all of Scotland’s property market, MSPs will be warned tomorrow.
Experts said the SNP’s land and buildings transaction tax (LBTT) is having “an adverse effect on the sale of properties in the middle to higher end of the residential newbuild market” after only months of being in place.
Both Homes for Scotland and the Scottish Property Federation (SPF) will suggest the Scottish Government moves its stamp duty replacement closer to the English model, which sees a more gradual tax increase as transactions become more expensive.
Homes for Scotland will tell the finance committee: “Anecdotal evidence was reported that potential buyers of properties in higher bands are deferring the decision to move because of the additional sums payable under LBTT compared to SDLT.
“If homeowners opt to stay rather than move to a new home due to concerns over cost, it would have implications over time for other parts of the market.”
And it will add: “Our view was this could impact on growing families and aspirational movers, resulting in them deciding not to move and leaving others unable to progress onto or up the housing ladder.”
The SPF will say that the main impact of the LBTT introduction has been in the market above £400,000 “where a significant reduction in transactions has occurred”.
Its evidence states: “If the current distortions in the residential property market are to be resolved then we would argue that major changes to thresholds are essential for 2016/17.”
When the SNP first proposed its LBTT changes, the Scottish Conservatives were highly critical, saying they punished families in certain parts of the country, and punished those who aspired to move to a bigger property.
And even when the Scottish Government was pressured into easing the burden on homes of £250,000 and more, the party warned that the rates would slow sales down at the top end, something which would eventually filter down to the rest of the market.
Scottish Conservative leader Ruth Davidson said:
“We warned the Scottish Government that having punishing rates at the upper end of the market would result in a slowdown.
“That would only make things harder from everyone else as it seeped through the market, and now these experts are saying that is set to be the case.
“But the SNP simply used its usual class-war rhetoric, and pushed on with the changes anyway.
“Not only does its LBTT punish aspiration and make it harder for families in some areas of Scotland to buy a house sufficient for their needs.
“It’s now beginning to impact further down the chain, and slashes the amount of money taken in by government to spend on services, blowing a hole in the SNP’s budget.
“John Swinney should heed this advice and look at ways of making it easier for those in the middle of the market to secure the right home for their family.”
To listen to Scottish Conservative leader Ruth Davidson speaking about the impact of LBTT click here.