Knight Frank updated comment on new Scottish LBTT rates

Oliver Knight, Knight Frank Research, comments:

“Knight Frank welcomes the introduction of a more progressive method of levying stamp duty on residential property, but levying such high rates could entrench a more static market and could impede the efficient use of property. 

Based on the rates announced, buyers purchasing a home worth less than £320,000 or less will see their stamp duty payments reduced under the new Land and Building Transaction Tax (LBTT), benefitting some first-time buyers and those keen to move up the housing ladder. 

However policymakers should consider how the impact of higher charges for homes worth £320,000 may affect the market. Many buyers in Edinburgh, Aberdeen and other rural locations within commuting distance of employment hubs, where prices for larger family houses tend to be higher, are likely to see a rise in the up-front cost of moving, which could weigh on activity, especially in the short term. 

Under the current system, a house costing £500,000 will incur a stamp duty payment of £15,000. The upfront costs under the new LBTT system for the same property will be £27,300, an increase of 82%.

Homes worth £250k+ accounted for 72% of the total £215m stamp duty take in Scotland last year, and policymakers may need to consider allowing some room for manoeuvre on these rates if they find that they are impacting on activity at this end of the market.

This additional cost could also affect the rate of price growth for larger family homes as some buyers choose to reduce their budgets, or look to offset the higher cost of moving by offering below asking prices. Despite the referendum, there has finally been an upward trajectory in the prime Scottish property market within the last 24 months. This may be tempered by the introduction of the LBTT.

Prior to the introduction of the new levy in April, we expect to see an increase in the number of prime sales and homes coming to the market as both buyers and vendors look to move before costs rise.”

Courtesy: Knight Frank