Government in dock over LBTT
New land tax ‘pricing foreign investors out of market’
Veteran estate and letting agent, David Alexander, has warned that overseas money will be diverted into English cities where tax on higher priced property is much lower.
A growing numbers of foreign investors – keen to get their money into UK property but finding London overpriced – are starting to look at the English regions and Scotland as alternatives.
However, interest in Scottish properties among Chinese and UK expatriate investors was being negated by “a growing sense of unease about Scotland”.
This was caused largely by the new rates under the new Land and Buildings Transaction Tax which replaces stamp duty in Scotland next month.
Mr Alexander said: “Chinese investors, for example, are not interested in anything under £500,000 and more probably will be looking at the £1 million-plus price bracket.
“At present, the tax on a £1m property transaction is £40,000 and this will rise to £78,350 on 1 April whereas the tax on a £1m sale in England will be £43,750 – almost £35,000 less than in Scotland.”
He continued: “Take two similarly-priced executive flats in Manchester and Glasgow, which in many ways are similar cities in terms of capital growth and rental income. Which property is the foreign investor likely to buy – the one where the tax is £78,350 or the one where the tax is £43,750?
“It doesn’t take a genius to work out the answer.”
Mr Alexander has made regular missions to promote Scottish properties to investors in the Middle and Far East over the last 25 years.
The managing director of DJ Alexander, said: “Most of the publicity has focussed on what LBTT means for owner-occupiers but there will be serious implications for the investment side of the market too.”
He continued: “A few of the rental reforms enacted by Holyrood have been sensible and proven good for the market but allied to this is a feeling that government interference is going too far and is becoming a disincentive to investment.
“Some people take the view that the well-being of foreign businessmen is of no concern to them but investment from outside the UK should be seen as a vote of confidence in the Scottish residential market, which helps everyone.”