Scotland has strongest property market for almost a decade
Scotland is experiencing its strongest property market for almost a decade despite the general election, Brexit, higher taxes and a chronic lack of supply, according to a new analysis.
If the Scottish Government decides reconsider property tax rates then the residential market has the potential to rival the performance of other markets around the UK and attract greater inward investment, says the report form real estate firm Savills.
It says that market activity across Scotland is at its highest level since 2008, with a total of 101,421 residential transactions during the year ending June 2017. However, the market above £750,000 is struggling to adjust to Land and Buildings Transaction Tax (LBTT) and witnessed a reduction in transactions.
Punishing rates of property taxation is putting Scottish property buyers at a distinct disadvantage, according to Andrew Perratt, head of Savills Residential in Scotland. He pointed out that buyers are paying £48,350 on a £750,000 residential property for a main home or £70,850 for a second home.
In the rest of the UK, the tax would only be £27,500 for a main home or £50,000 for a second home. As a result, the average prime transaction price in Scotland has fallen from £572,000 to £554,000 in five years.
‘The political landscape is dictating the market in some price bands, with higher rates of property tax in Scotland discouraging movement amongst local buyers and doing little to attract inward investment from further afield,’ Perratt explained.
In addition, house buyers in Scottish cities are facing a vicious circle of demand exceeding supply. ‘The trend in Scottish cities is now to buy before selling. As a result, we are witnessing a chronic shortage of stock, competitive bids and strong premiums for properties launched onto the market at realistic prices, particularly in city and suburban hotspots,’ Perratt added.
According to latest figures from Savills, the time taken for properties coming onto the market to reach a sold status across Scotland’s cities has dropped to nine weeks, compared to 12 weeks earlier in 2017. Looking at Edinburgh in particular, demand remains strong with current selling times averaging six weeks across all price bands, compared to nine weeks earlier this year.
Overall, the report explains that these factors have fuelled Scottish house prices which increased annually by 2.9% in June 2017.
Faisal Choudhry, head of residential research at Savills believes that LBTT is putting the housing market under pressure, particularly in Edinburgh where a lack of mainstream supply has led to fewer properties being launched and a subsequent drop in sales.
‘The number of sales has fallen for the first time in six years and shortages will continue to suppress transactions going forward. We are seeing a lack of fresh prime stock on the market, as taxation bites: more people are staying for longer in their homes, rather than moving and being faced with unaffordable tax bills. This trend is likely to continue, unless there is a change in taxation rates,’ he said.
The research also shows that in Scotland there were 11% fewer properties launched onto the market so far this year above £400,000, compared to the same period in 2016.