We read with interest the main story in yesterday’s Herald newspaper which appears to suggest Land and Buildings Transaction Tax (LBTT) is the main driving force in creating the current stagnant property market in Scotland.
While RICS is correct in outlining this as a current issue, the LBTT cost increases are only one factor for part of the property market, particularly properties over £325,000. The average house price in Scotland remains well below £200,000 meaning there is much more at play here than simply LBTT. Transactional numbers skew any attempt to consider “revenue raising” comparisons and to suggest that LBTT is the only reason for market performance is too simplistic.
Additional factors include:
1. Market confidence restricting supply and aspirational moves
2. Supply restrictions are a consequence of confidence and lack of choice if an individual’s property sells
3. Overheating of certain property types and locations is restricting the decision to enter the property market
4. Affordability to move up the property ladder due to a fall in real income
Since its introduction, LBTT has certainly had a detrimental effect on the higher price properties and subsequently the revenues generated by the Scottish Government. It will be interesting to see what the next move is in addressing this. However, as noted above, there are many factors at work currently in the Scottish residential market that need to be considered before the market returns to equilibrium.