Scottish prime property market set to be busy due to tax change in April

Taylor Scott International News

An increase in demand for prime property in Scotland between September and December ensured a strong end to 2014, both in terms of prices and sales, the latest index report shows. Overall prime Scottish country house values rose by 1% in the final quarter of 2014 following two quarters of no change and prices ended the year up 2.1%, after a 1.6% increase in 2013, according to the figures from Knight Frank. The index report points out that the rise in prices seen in the fourth quarter came amid a notable step up in buyer demand, attributed to the certainty provided by the result of the Referendum vote and the announcement of the proposed Land and Buildings Transaction Tax (LBTT) that replaces stamp duty in Scotland from April. ‘After months of doubt about the outcome of the referendum, buyers now feel more secure about making a decision to move house or purchase a property,’ the report says. ‘The proposed LBTT rates published in October clarified how purchase taxes would change in April. The higher upfront cost of moving when LBTT comes into force, especially in the prime market, has prompted some home buyers and vendors to make quick decisions,’ it explains. Under the rates proposed in the incoming LBTT system, any sales above £254,000 will incur a higher rate of tax compared with the current stamp duty structure, introduced in December in the Autumn Statement by George Osborne. For properties in the prime market, the cost will be significantly higher. The report also shows that the number of potential buyers registering their interest in purchasing a property with Knight Frank was 18% higher in quarter four than the same period a year ago, with a similar rise in viewings. Sales were over 50% higher during the same period. ‘We expect this trend will continue into the New Year, driven by a desire among vendors and homebuyers to move before the introduction of the new LBTT levy in four months’ time,’ said Ran Morgan, head of Scotland residential at Knight Frank. He pointed out that under the current system, a house costing £900,000 will incur a stamp duty payment of £35,000, whereas the upfront costs under the new LBTT system for the same property will be 92% higher at £67,300. As a result of the stamp duty reforms announced during the Autumn Statement, by the time LBTT is introduced, home buyers in Scotland will have had to adjust to three different tax systems within six months. ‘The announcement of the proposed Land and Buildings Transaction Tax rates in October has already encouraged vendors and homebuyers in the prime market to make quick decisions to avoid the increased tax burden. We expect this will continue and as a result are anticipating a busy start to 2015,’ said Morgan. ‘In the country estates market, details of Land Reform proposals and CAP reform continue to emerge. Until these are finalised we expect the activity to remain subdued,’ he added. Continue reading →

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