Strongest market since 2008, despite punishing LBTT and chronic undersupply, says Savills

08 September 2017

Strongest market since 2008, despite punishing LBTT and chronic undersupply, says Savills

Despite the EU Referendum, this year’s General Election, higher rates of taxation than the rest of the UK and a chronic lack of supply, Scotland is experiencing the strongest property market since 2008. Should the Scottish Government reconsider LBTT rates then the property market has the potential to rival the performance of other markets around the UK and attract greater inward investment, according to Savills latest Research.

The findings were launched at Savills annual Scottish Property Outlook seminar attended by 300 property professionals in Glasgow on Friday 8th September.

It was reported that market activity across Scotland is at its highest level since 2008, with a total of 101,421 residential transactions during the year ending June 2017. However, the market above £750,000 is struggling to adjust to Land and Buildings Transaction Tax (LBTT) and witnessed a reduction  in transactions.

Andrew Perratt, Head of Savills Residential in Scotland said:  “Punishing rates of property taxation is putting Scottish property buyers at a distinct disadvantage.  Buyers in Scotland are paying £48,350 on a £750K residential property for a main home or £70,850 for a second home.  In the rest of the UK, the tax would only be £27,500 for a main home or £50,000 for a second home.  As a result, the average prime transaction price in Scotland has fallen from £572K to £554K in five years

“The political landscape is dictating the market in some price bands, with higher rates of property tax in Scotland discouraging movement amongst local buyers and doing little to attract inward investment from further afield.”

In addition, house buyers in Scottish cities are facing a vicious circle of demand exceeding supply. He said:  “The trend in Scottish cities is now to buy before selling. As a result, we are witnessing a chronic shortage of stock, competitive bids and strong premiums for properties launched onto the market at realistic prices, particularly in city and suburban hotspots”.

According to latest figures from Savills, the time taken for properties coming onto the market to reach a sold status across Scotland’s cities has dropped to nine weeks, compared to 12 weeks earlier in 2017.  Looking at  Edinburgh in particular,  demand remains strong with current selling times averaging six weeks across all price bands, compared to nine weeks earlier this year.

These factors have fuelled Scottish house prices, which increased annually by 2.9% in June 2017.

Faisal Choudhry, Head of Residential Research in Glasgow said:  “LBTT is putting the housing market under pressure, particularly in Edinburgh where a lack of mainstream supply has led to fewer properties being launched and a subsequent drop in sales. The number of sales has fallen for the first time in six years and shortages will continue to suppress transactions going forward.    “We are seeing a lack of fresh prime stock on the market, as taxation bites:  more people are staying for longer in their homes, rather than moving and being faced with unaffordable tax bills. This trend is likely to continue, unless there is a change in taxation rates”.

There were 11% fewer properties launched onto the market so far this year above £400,000, compared to the same period in 2016.

 
 

Key Contacts

Faisal Choudhry

Faisal Choudhry

Director, Scottish Research
Residential Research

Savills Glasgow

+44 (0) 141 222 5880

 

Beth Hocking

Beth Hocking

PR Manager
Press Office

Savills Edinburgh

+44 (0) 131 247 3739