HOUSE hunters in Edinburgh will see little impact from the abolition of Stamp Duty for first-time buyers, which was the major announcement in the recent UK budget, according to leading experts in the city.
Experts at Warners Solicitors & Estate Agents have predicted the Scottish Government is unlikely to loosen its own property tax system to match the benefits announced by UK Chancellor Philip Hammond.
And, they say that even if the SNP powerbrokers at Holyrood were tempted to tinker with Land and Buildings Transaction Tax (LBTT), the trickle down would have little impact on Edinburgh’s property market.
David Marshall, Operations Director at Warners Solicitors & Estate Agents, said that even if the Scottish finance minister Derek Mackay did follow the Tory government’s example and abolished LBTT for home purchases up to £300,000, the impact on the market would be negligible.
He explained: “In the short-term, abolishing LBTT would help any first-time buyers looking to buy a home for more than £145,000. If a couple were looking to buy their first home at £200,000, for example, they would save £1,100 in tax.
“Similarly, if they bought a property for £250,000 or even £299,000, they would save £2,100 or £4,450 in tax, respectively.
“That’s money that they could instead put towards a deposit, to help furnish the property once they move in, or to simply act as a safety net.”
“Of course, most first-time buyers aren’t buying properties at these prices though and, in terms of the impact on the overall market, the benefits would be limited. The main problem for many first-time buyers who are struggling to get onto the ladder is that property prices in some areas are too high.
He continued: “The population of Scotland is rising, people are living longer and the average household size is reducing.
“As a result the total number of households across Scotland, and especially in Edinburgh, is projected to rise for the foreseeable future and the rate at which we are building homes has not been sufficient to keep pace.
“The fundamental issue that needs to be addressed is an increase in supply of new, affordable housing for first-time buyers. While any tax relief would no doubt be welcome in the short-term, the long-term benefits to the market of this move in isolation would be fairly minimal.”
Mr Marshall says experts at Warners, which has been one of the biggest and best-known names in property for more than 20 years, do not expect the Scottish Government to make any major amendments to LBTT.
He added: “Immediately following the budget the First Minister’s Chief of Staff, Elizabeth Lloyd, tweeted that ‘the average of all house prices in Scotland is £145k which is where LBTT starts’, meaning that most first-time buyers already don’t pay LBTT. This suggests that the Scottish Government is very clearly setting out its stall out to resist any calls for a similar tax break in Scotland.”
However he acknowledged political winds can shift quickly and added: “Changes to property taxation north and south of the border have followed very similar trends in recent years.
“In December 2014, when SDLT moved away from the old banding system, the changes were very similar in principle to those which had already been proposed by the Scottish Government for LBTT.
“Similarly when Westminster announced that an additional 3% tax would be applied to purchases of additional homes in 2016, it was a move that was quickly replicated for LBTT in Scotland.”
Whatever happens, Mr Marshall says there will be no rush of house hunters looking south of the border in a bid to avoid property taxes.
He added: “The average property price in Scotland is substantially lower than the UK average. The Nationwide House Price Index shows that in the third quarter of 2017 the average house price in Scotland was £146,022, well below the UK average of £210,982. For most first-time buyers, any saving in tax would be more than offset by the extra amount that they would need to spend to buy their new home.
“Additionally, when people are deciding where to look for their first home, factors such as employment and family commitments tend to weigh far more heavily than a saving the level of property tax that they would pay.”
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