The heat is on in Edinburgh as buyers and investors rush to complete on properties before the new sales tax rates come in on April 1.
The Scottish Finance Minister’s pledge to review the rates for Land and Buildings Transaction Tax (LBTT) last week rather took the wind out of the sails of many Edinburgh-based estate agents. After undergoing, in the words of Blair Stewart of Strutt & Parker, ‘a traumatic year with the market grinding to a halt in the run up to the Referendum in September and missing out the prime selling season in Scotland’, things then went into overdrive after the new LBTT was initially announced on October 9 as people grasped the opportunity to buy a property before the new rates came into force on April 1.
‘We saw a landslide of flats and houses in excess of £250,000 come to the market in the run up to Christmas—December was busier than I ever remember,’ comments Mr Stewart.
After considerable lobbying by the Scottish Conservatives to the Scottish Government, it was announced that the rates, which were thought to be punitive for anyone buying at the top end of the market were being reviewed. ‘When George Osborne introduced the new Stamp Duty rates (SDLT) (on December 3), we looked so out of kilter: it made Scotland look shut for business for investors and aspirational families,’ Mr Stewart adds.
However, the much-anticipated introduction of a mid-market rate for properties priced between £250,000 and £500,000 didn’t materialise last week; instead, the new band of 5% is to be applied to properties worth between £250,001 and £325,000. Those priced between £325,001 and £750,000 will pay 10% from April 1 and anything sold over that threshold will be taxed at 12%.
The news isn’t all bad, however. According to Edward Douglas-Home of Knight Frank in Edinburgh, the beneficiaries of this rate review will be middle-income families looking to move up the housing ladder. ‘The average detached family home in Edinburgh is about £390,000, rising to a lot more in parts of the city, including Morningside and the New Town. Under the original rates, the tax bill would have been £16,300; the revised rates mean the LBTT charge for the same property will be £12,350.’
The pivotal point at which the revised rates become more painful than the original LBTT levy is with houses valued over £947,500. ‘Buyers at this level and above will be facing a significantly higher bill when compared to the current UK Stamp Duty levels,’ adds Mr Douglas-Home.
It’s not surprising, therefore, that agents are expecting a flurry of activity between now and April 1. According to figures from CKD Galbraith, the Edinburgh city market already saw a bounce in November with new interest from English and international buyers. Jennifer Campbell says she’s seen ‘high sale numbers and a desire to get transactions finalised before April 1’ as well as ‘a return of buyers from the South and abroad’.
Mr Stewart is more vocal. ‘Although the review helps the lower end of the market, it’s a blow to everyone else. If families can’t upsize because of the increase in tax, it will lead to a stand- still in the middle of the market, which is really the engine room of a thriving housing sector. Once LBTT comes into effect, we anticipate buyers will be more cautious in their offers to take account of the heavier tax burden.’