A number of leading figures from Scotland’s property industry are lining up to blast the SNP on its “punitive” plans to replace stamp duty.
At tomorrow’s finance committee, MSPs will be told the proposals to increase the levy to 10 per cent on properties over £250,000 risks damaging the market and placing family homes out of reach for thousands.
Under the Scottish Government’s new Land and Buildings Transaction Tax (LBTT), the new regulations will come into force in April, and will have a particularly severe impact on people buying homes between £350,000 and £500,000.
The Scottish Conservatives described the move as an “assault on aspiration”, and a range of organisations in the industry have now echoed that criticism.
The Scottish Building Federation will tell committee members the move could have “a negative impact on what continues to be a relatively fragile market” and that more of its members thought it would be a worse alternative to stamp duty.
It added: “There may be merit in particular in looking again at the impact this is likely to have on property transactions valued up to £500,000.”
The Scottish Property Federation added: “We are concerned at the higher value rates applied to residential property and we fear this will have a negative impact on those sections of the markets, with a potential knock-on consequence for those seeking to move up the property ladder.”
It warned that there could be a reduction in sales between £250,000 and £400,000, which would have a negative impact on how much revenue the Scottish Government collects.
Some organisations were also concerned that certain areas of Scotland where house prices were far above the national average would be impacted by the change.
Suggestions to reduce the impact include setting a new rate between two per cent and 10 per cent for properties in £250,000 to £1 million bracket.
And in its submission, Homes for Scotland added: “We view the rate on transactions over £250,000 to £1 million to be too punitive on the upper-middle market. This core market comprises aspirational movers and families with changing needs. It should not be assumed that these households are able to raise the additional funds required.”
Scottish Conservative finance spokesman Gavin Brown MSP said:
“It is clear there is widespread concern about the negative impact of this tax.
"That’s why the Scottish Government has to think again and give serious consideration to a reduction in the rate.
“No analysis has been done into the impact behavioural change might have on this, which would of course affect the amount of money the Scottish Government collects.
“Some of that could lead to market stagnation in an industry which is still fragile.
“This is a punishing tax which hampers those who simply aspire to move to a bigger family home, and that could have a knock-on effect further down the ladder.
“The SNP should be trying to ease the tax burden on families, not adding to it.
“We are not talking about a mansion tax which will only impact millionaires; this is people in their late 20s, 30s and 40s who are simply looking to take the next step.”
Notes to editors:
The subject will be discussed at tomorrow’s finance committee in the Scottish Parliament. Some of the submissions can be viewed here:
Below are some submissions to the committee which don’t appear in the above link:
“We believe that the new rates will undoubtedly have a negative impact on sales activity in the mid-market upwards, and a resulting detrimental effect on the Scottish economy as a whole.” - Savills
“This may have the effect of creating a slow down in the residential property market for homes over £325,000 which will have a knock on effect further down the housing ladder.” - Pinsent Masons LLP
“Prior to April 2015 the introduction of higher rates for residential property is likely to accelerate the purchases of properties with a price in excess of £325,000. Post April 2015, activity in this sector of the residential market is likely to slow down with both buyers and sellers impacted by the higher upfront costs of purchasing these residential properties.” - KPMG
“Families purchasing homes in prime property areas, such as Edinburgh and Aberdeen, where average prices are consistently higher than the Scottish average, would face significantly higher liabilities.” - Gillespie MacAndrew LLP
“The people purchasing in this category are not necessarily “super rich” and the measure has the potential to adversely impact on recovery of the housing market in these areas.” - Council of Mortgage Lenders
The Scottish Conservatives criticised the move as being an assault on aspiration: