Residential revenue recovers
Property tax receipts up, but market remains patchy
David Melhuish: big fall in higher value properties (photo by Terry Murden)
Revenue from controversial residential property taxes are on course to rise above the sum raised from stamp duty for the first time.
However, sales of homes at the top of the market remain sluggish and revenue from commercial property is still below target, according to trade body the Scottish Property Federation.
Figures released by Revenue Scotland, show Land and Building Transaction Tax (LBTT) revenue rose last month by £5.2m on July, to £52.8m.
This was a jump of £11.6m on the same month in 2016, making it one of the highest total monthly revenues generated from LBTT since the tax came into effect in April 2015.
Residential revenue rose to £28.5m with the second homes tax, the additional dwelling supplement, bringing in £12.1m. If sustained, residential revenue for 2017 (not including the second homes tax) will surpass the £270m of residential revenue raised in the last year of stamp duty land tax for the first time since LBTT was introduced.
This improved revenue is a result of a recovery to pre-LBTT levels of sales of residential properties above £325,000, and a further rise in revenue from the Additional Dwellings Supplement ‘second homes’ tax.
LBTT revenue from commercial property sales rose for the first time in five months, standing at £12.5m. However, 2017/18 remains a poor year for commercial LBTT (£65.4m) as the total value of LBTT still lags behind 2016/17 (£67.7m) and 2015/16 (£71m).
David Melhuish, director of the Scottish Property Federation, said: “The Scottish Government will be pleased to see that over the summer tax revenues from higher value residential sales have returned to pre-LBTT levels.
“When added to the windfall generated by the second homes tax (ADS), it is clear the government will expect to reach its 2017-18 LBTT revenue targets, even if weighed down by below-par commercial LBTT figures.
“However, crucially, leading agents are reporting a significant fall in higher value properties coming to market – reducing economic activity and adding pressure on house prices.
“We strongly believe that if the 10% residential threshold in Scotland is raised from £325,000 to £500,000 we would see more tax transactions, which could further boost to both government revenues and market activity.
“Whilst the residential figures are showing signs of improvement, the SPF remains concerned that Scotland’s commercial property market sector continues to show low levels of transactions, particularly for investments above £5m.
“This is now affecting government revenues with commercial LBTT set to significantly under-shoot its forecasts for the second year running’