Home Economy Residential property market flatlines despite strong demand
Royal Institute of Chartered Surveyors (RICS) market survey reveals ongoing concerns over Land and Buildings Transaction Tax (LBTT)
Demand remains strong for residential properties in Scotland, but there are concerns the market is being “restricted” by the effect of the Land and Buildings Transaction Tax, the latest survey by RICS has found.
Professionals in the sector reported the tax was having a “significant impact on the £500k-plus market”. Elsewhere, property professionals reported strong market demand, with high confidence that prices will continue to rise in the next quarter.
Hew Edgar, RICS Scotland Policy Manager, said: “A number of respondents to August’s Residential Market Survey indicated that the LBTT framework continues to dampen market activity in the middle house price bracket and above.
“Whilst transactions – which are a component part of activity – at this level are still going through, buyer enquiries and sales instructions are flat-lining, and this continues to be a concern of RICS professionals acting in this arena.
“The Scottish Government has proposed an LBTT Bill in this year’s Programme for Government, and in its current form it will provide a useful tidying up of current legislation surrounding the Additional Dwelling Supplement (ADS).
“However, prior to this Bill being tabled, the Scottish Government should fully assess the impact that the current tax bands are having on market fluidity across the price brackets.
“They may also wish to consider whether they can use the LBTT regime as an economic lever to optimise Scottish housing market activity through, for example, exploring the impact that exemptions for downsizers and those purchasing regenerated empty properties, of which there are 34,000 in Scotland, could have.”
Meanwhile, across the UK, the supply of properties continues to be an issue, with 1% more respondents seeing a fall in new sales instructions at the national level. Although this has now turned less negative three months in a row, following such a sustained period of deteriorating sales instructions average stock levels on agents’ books are still near an all-time low.
The August survey contained an additional question to ascertain whether respondents, in the light of policy changes, felt more landlords would enter or exit the market going forward. Nationally, 61% felt landlords would exit the market over the coming year, while only 12% felt there would be a greater number of entrants. Moreover, for the next three years, 52% felt there would be a net reduction in landlords, with only 17% suggesting a rise.