Main Menu

Ministers too 'heavy-handed', says JLL

Swinney’s land tax ‘stifling property market’

Property for saleFurther evidence has emerged that the Scottish Government’s replacement for stamp duty is holding back the property market and the ability of firms to attract senior executives from south of the border.

Property firm JLL Scotland says the land and buildings transaction tax has resulted in a slowing of high value commercial and residential transactions, creating a stagnated market.

Alasdair Humphery, lead director at the firm, said: “We’ve now passed the two year anniversary of LBTT and it is clear to see a negative impact on Scotland’s property market.

“For too long, commercial property receipts have been used to balance out an underperforming residential market, caused by heavy handed taxation particularly at the middle and top ends of the market.

“Homeowners are facing further obstacles to sell their homes in the £325,000 to £750,000 bracket, with a 10 per cent tax handed to buyers.

“The tax has undoubtedly stifled within this bracket, especially in central belt cities where homes are more expensive.

“Mid-market transactions, which are typically the lifeblood of any property market, have been restricted by this broad banding, making it hard for people to either buy larger homes or downsize to smaller ones.

“By revising the threshold currently in place across sales from £325,000 to £750,000, we would most likely see an increase in buyer activity, to the benefit of the tax pot and the property market.

At the top end of the market there is also a value discrepancy between Scotland and England, which Mr Humphery says is creating an “uneven playing field.”

LBTT places an extra £45,000 on to the cost of a £1m home in Scotland compared to a similarly priced property in England.

Mr Humphery said: “Aside from those already living in Scotland, another consideration is the impact higher taxation is having on people looking to relocate to Scotland for work, particularly those moving from London or other large English cities.

“When faced with increased income tax and stamp duty proportionately higher than in England, there is a risk that hefty taxation could deter high profile hires from relocating to Scotland.”

John SwinneyThere have been a number of predictions, not least from the Scottish Property Federation, that LBTT receipts will not hit the targets set by John Swinney (right) when he introduced the tax as Finance Secretary in 2013. The tax came into force from April 2015.

The latest findings found that LBTT in 2016/17, across all sectors generated revenues of £481.1m, £56.9m (10.6%) below the Scottish Government’s forecast, and only £65.1m more than the first year’s take. 

The Scottish Government forecast in its 2016/17 budget that it would raise £538m from LBTT. This is despite current average monthly LBTT revenue standing at £36.5m.

The introduction of Additional Dwelling Supplement (ADS), which taxes commercial and residential owners on second properties, is thought to have boosted LBTT figures significantly, but not enough to meet targets. Excluding the new ADS, LBTT revenue for 2016/17 was £389.8m, £26.2m (6.3%) less than in 2015/16.

The Scottish Government raised £214.2m from commercial LBTT in 2015/16. In 2016/17 that figure was only £177.3m – a decrease of £36.9m or 17.2%.

LBTT was recently criticised in a study commissioned by the Scottish Government on the recommendation of the Scottish Fiscal Commission to explore model option for forecasting the housing market. The study found the modelling was “ill-suited” and “poor” with the tax very difficult to accurately forecast.

The Scottish Green Party is calling for more regulation on short-term lets as new research shows it is becoming more difficult to find somewhere to live in the capital.

The study indicates that about half the homes in the EH1 postcode will be holidays lets by 2050.

The Scottish Green Party estimates that if current trends continue, around half the homes in the EH1 postcode will be holiday lets by 2050.

MSP Andy Wightman says councils need more power to control how properties listed as residential are used.

“We’re calling for the city council to be able to have the choice and to be able to make decisions about how residential property is used – and that means introducing new use-class orders in the planning system,” he said.

“So for example, if you want to change your flat into a shop, you have to apply for planning consent. If you want to change your flat to a holiday home, you don’t. We want that to be a requirement so that the city council can come to a view on how it wants to see residential property used.”

Cities like London, Paris and Berlin have already introduced regulations on short-term lets.

One developer, Dunedin House Properties, has banned owners of a new development in the west end of letting them on a short-term basis in order to protect the privacy of residents.

 

 

Share The News Tweet about this on TwitterShare on FacebookShare on Google+Email this to someoneShare on LinkedIn





Leave a Reply

Your email address will not be published. Required fields are marked as *

*