House prices are up but sales are down in Scotland’s property market

 

Scotland had a strong 2017 in terms of property prices with a year-on-year rise of 3.6%, but the number of transactions fell, and many are blaming the country’s controversial property tax.

The latest UK House Price Index has revealed that West Dunbartonshire near Glasgow saw record property price increases of 10.3% on average between November 2016 and November 2017, bringing houses there up to an average value of £106,216. East Lothian and Edinburgh also enjoyed steep price hikes of 8% each, bringing property prices up to £217,106 and £246,508 respectively.

In Scotland overall, house prices gained 3.6% to reach a height of £145,992 on average according to the index, compared to the UK average house price of £226,071 – a year-on-year rise over the same period of 5.1%.

However, residential property sales in the country have slowed, with the finger being pointed at Scotland’s land and buildings transaction tax (LBTT) which came into effect in 2015 and has inflated the cost of buying for many higher priced homes.

When compared with September 2016, property sales were down by 2.5%, with the last month seeing a dip of 0.5% in the number of transactions. The strongest sales levels were seen in Edinburgh, Glasgow, Fife and South and North Lanarkshire, but many other areas struggled.

Land and buildings transaction tax

Some estate agents believe this is down to restrictive property tax causing less people to want to sell, because buyers are offering lower prices to reduce their costs.

Ben Fox, head of residential sales in Edinburgh at Savills, said: “We’re seeing pensioners who might otherwise have downsized deciding to stay put. It’s a constricted market. My sense is that overall stock levels are at their lowest since LBTT was introduced.”

The tax, which replaced stamp duty, is applied proportionate to the actual price of the property, according to the Scottish Government’s website, and is chargeable on properties over £145,000. Similarly to stamp duty, the tax goes up in brackets:

Purchase Price Rate – on that portion of purchase price
Up to £145,000 0%
Above £145,000 to £250,000 2%
Above £250,000 to £325,000 5%
Above £325,000 to £750,000 10%
Over £750,000 12%

A spokesman for the government defended the tax’s influence on the property market, citing figures from other sources which painted a different picture: “Official data from Revenue Scotland shows that total residential transactions in the 12 months to November 2017 were up by an annual 4%, while growth in the £325,000 to £750,000 price bracket was even higher at 18%.”

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House prices are up but sales are down in Scotland’s property market

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