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New tax ‘likely to hit £1m-plus home sales’

The sale of million pound homes could falter as a result of John Swinney’s replacement tax for stamp duty, according to one estate agent – and some homebuyers facing huge new charges want the new levy to be reviewed.

The finance secretary introduced the Land & Buildings Transaction Tax just a few weeks ago in a move designed to make the levy on home buying fairer.

But David Alexander, managing director of the estate and letting agency, DJ Alexander, which regularly deals in houses and flats in the £1m-plus bracket, says aspiring home-owners in the middle market are not prepared to pay the new “swingeing” rates of tax as they trade up.

He said: “At present someone buying a house at £1.5 million will pay £75,000 in stamp duty but under LBTT the charge will rise to just under £140,000, an increase of £65,000. This is a swingeing tax increase which even people who might be considered affluent will baulk at, whether they feel can afford to pay it or not.”

Alexander said that even when a property was capped at £1 million, the tax due under LBTT would be £77,300 as opposed to £40,000 under the present regime.

He insisted that he was “not scaremongering”, but said: “That so many homes in Edinburgh sold for £1 million and more was due to the financial services boom prior to 2008, with many of the buyers who came from the south of England since having moved back.

“High net worth individuals from outside are still seeking to buy in upmarket areas of Edinburgh but it is probably true to say that demand is back to ‘normal’ levels. As a result many sellers have already taken a financial hit so I don’t see them reducing their asking prices further to enable potential buyers to pay less in LBTT.

“Consequently, with sellers simply unable to drop their price and buyers inhibited from paying the asking price because of the tax consequences, the inevitable result could be stagnation.

“People living in more modest properties who are struggling to pay mortgages may not have much sympathy for those who occupy seven-figure homes in areas like Barnton and The Grange but there is a very real danger that stagnation at the top end of the market will trickle downwards. The end result could be a logjam within the lower and lower-middle price brackets which will do nothing to help first-time buyers get a foot on the property ladder.”

Alexander said it was likely that high-end homes in Glasgow and its more affluent suburbs would share the same consequences as those in Edinburgh although the outcome in Aberdeen was less predictable because of the special circumstances operating there.


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