High property tax rates in Scotland hitting the million pound property market
Punitive rates of property tax are curtailing the million pound property market in Scotland with a substantial drop in sales in this housing price bracket.
According to a new report from real estate firm Savills last year sector seemed to be absorbing the rates of Land and Buildings Transaction Tax (LBTT) better than other price bands.
However, the taxation malaise is now spreading into this market with only 56 transactions in the first half of 2017, compared with 79 during the same six month period last year.
The LBTT on a £1 million residential property is £78,350 for a main home or £108,350 for an additional property. In the rest of the UK the tax on a £1 million residential property is considerably lower at £43,750 for a main home or £73,750 for an additional property.
‘Higher rates of property taxation are putting buyers north of the border a distinct disadvantage and will do little to attract wealth from outside Scotland,’ said Faisal Choudhry, director of Savills Scotland research.
He explained that the structure of LBTT relies heavily on the top end of the market, but buyers are being dissuaded from making offers due to punitive rates. Furthermore, fewer prime properties are being launched on to the market in Edinburgh, from where LBTT generates a significant level of revenue.
‘The Scottish Government’s ambitious LBTT targets will not be achieved unless there is a significant change in rates,’ he pointed out.
The research also shows that this market is becoming less concentrated in Edinburgh and the Aberdeen area, with more activity spreading out to the west and other regional locations.