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Deals show first fall for five years

Mackay facing £73m shortfall from property tax

Derek Mackay

Derek Mackay: call to respond

Finance Secretary Derek Mackay will have to find £73 million to plug a shortfall in expected revenue from the Scottish Government’s new property tax.

A slowdown in commercial property transactions will leave the Holyrood administration short of the target it set in 2016/17 budget.

Ministers expected to generate £220m from commercial land and buildings transaction tax and there have been a number of recent warnings that this figure will not be reached.

With only February and March figures to be reported they still need £73m to meet expectations, a gap which the Scottish Property Federation says is “highly unlikely to be closed”.

Recent analysis from the SPF has shown that the total value of commercial property sales in Scotland declined 13% in 2016 – the first annual fall since 2012.

Commercial sales data from Registers of Scotland revealed that in Q4 of 2016 (Oct-Dec) the usual pre-Christmas boost in transactions was less pronounced, adding to a weakening demand for commercial properties reflecting a wider slowdown in the economy.  

Scotland’s major cities, with the exception of Edinburgh, mirrored the national slow down. The commercial real estate market in Aberdeen continues to be a casualty of low oil prices with the market data for October to December 2016 showing a 15% decline in the number of properties sold when compared to the same period in 2015.

Glasgow witnessed a fall of 30% in commercial property transactions. In Edinburgh the market remained buoyant, with the number of commercial properties sold increasing by 2%.   

David Melhuish 3SPF director David Melhuish (right) said: “A strong commercial real estate market is not only important for the Scottish economy as a whole, but also for the Scottish Government – as shown by recent LBTT revenue figures. We have to work collectively to ensure that we see activity and confidence levels in the commercial property markets boosted. 

“We need to support commercial development to provide new offices, leisure and industrial buildings across Scotland that are right for modern businesses of all sizes.  There are some fantastic developments such as Edinburgh St James but they are simply too few in number right now. 

“A better resourced, motivated and higher performing planning service that is open to investment, combined with supportive business rates policies for new development are two proposals that would help to stimulate investment in the Scottish markets.”

Scottish Property Awards: see report and full list of winners 

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