NAEA gives evidence to the Scottish Parliament

Wednesday 10 February 2016

On Wednesday 3 February 2016, Daryl McIntosh NAEA’s Business Development Executive attended the Scottish Parliament and gave evidence to the Finance Committee about the proposed LBTT supplement on additional residential properties.

The NAEA were invited to attend following its written submission to the Finance Committee in response to their call for evidence on the proposed LBTT supplement on additional residential homes. The Committee, made up of six members and chaired by Kenneth Gibson MSP, also questioned John Blackwood, Chief Executive of the Scottish Association of Landlords, Paul Curran, Vice Chairman of the Scottish Property Federation and Marian Reid, Deputy Director of the Chartered Institute of Housing Scotland.

The session, which lasted for an hour, included questions from the Chair and MSPs about the written response NAEA and the other organisations had submitted to the Committee. In the session Mr McIntosh reiterated NAEA’s view that if investors are deterred by the additional tax, theoretically the first-time buyer market should improve. However, the NAEA is finding that the main stumbling block is the lack of finance that is available for first-time buyers. Daryl added that this is not to say that first-time buyers are losing out to investors and the NAEA is not hearing this from our members, it is just that first-time buyers cannot purchase property at the moment because of the lack of finance available to them.      

We were also asked about whether we felt the additional tax was a real concern for those people who do decide to invest in second homes or buy-to-let property after April. The Committee also wanted to know how likely is it that we would see rent rises as landlords attempt to recoup costs. Daryl McIntosh explained that if investors have to pay additional tax it will come out of their budgets, so whether they will be able to make any improvements to rental properties is a big concern and if they can’t they will increase rents.

What about family help?
Another area NAEA wanted to highlight is when people purchase property for children because we know this is particularly important in university cities. It is also important when parents go on the mortgage to help children onto the housing ladder. NAEA believes the additional tax is going to affect these types of purchasers and inevitably not help first time buyers, which is the Scottish Government’s overall policy aim. 

Reclaiming tax at a later date
The NAEA also commented on the issue of people paying the additional tax up front and then reclaiming it later if the property is sold. For instance, some people in Scotland who buy before they sell, but for various reasons do not manage to sell their property first. Daryl said that this is a concern because of people accidentally falling into this situation through no fault of their own. For example, if somebody has already purchased a property but their sale falls through with their purchaser, they have to complete their purchase and as a result end up with two homes, which they never intended to have. Consequently, under the new rules they would be unfairly penalised. They probably wouldn’t have the finance to pay a bridging loan and, unfairly or unjustly, they would have to pay the extra tax as well and then claim it back.

Looking to England
Interestingly, John Mason MSP asked the panellists about people in England thinking of buying a second home in Scotland and whether the Scottish Government should worry about what is happening down south. Mr Mason asked whether it would be a good idea for the Government to wait for a year, see what happens and then legislate if there is a problem.    

All the panellists were in agreement that this would be a more sensible approach and more research is needed to understand the dynamics of the issue in Scotland. Members of the Committee seemed to be interested in the argument that many of the people the panellists were representing are those who invest in property to provide primary homes for people. Consequently they should be seen differently to people who want to invest in a hideaway somewhere in Scotland.

It remains to be seen whether MSPs will act upon these arguments, but NAEA has made its feelings clear and is at the heart of the debate.