We are also calling on the Scottish Government to address the steep threshold that home buyers’ experience between buying a house from the third tier (£250,001 to £325,000) to the fourth tier (£325,001 to £750,000) by reducing the LBTT rate to seven per cent for £325,000 to £500,000 and nine or ten per cent from £500,000 to £750,000.
Action needed now
By acting now, the Scottish Government can revitalise the housing market and avoid a disorderly and distressing period for movers and businesses throughout the market. Any extension or gradual phasing of the LBTT would also help mitigate sharp reductions in consumer demand.
More widely, a buoyant housing market drives consumer confidence in the wider economy whereas constrictions on lending and falling house prices lead to reduced consumer confidence and a material reduction in economic activity.
Propertymark believes urgent action is required and is calling the Scottish Government to:
- Announce an extension of the LBTT holiday of at least six months before Christmas to reduce the risk to the consumer.
- Work with the industry to develop a method to help smooth the end of an extended LBTT holiday to prevent another cliff edge.
We’re calling on the Scottish Government to step in and consider a tapered ending and extension of the holiday and to address the steep threshold that home buyers’ experience between buying a house in the band from £325,001 to £750,000. This will allow pressure on the system to be released so allow transactions to complete and avoid a disorderly and distressing period for consumers and businesses throughout the market.
Avoiding failed sales
In June 2020, the Scottish housing market emerged from lockdown re-energised by pent up demand following three months of lockdown. There was consumer demand to move to different types of property in addition to the delayed chains in the pipeline in March, bolstered by the temporary reduction of LBTT.
Despite lockdown, property transaction levels have now accelerated, from August to October, the number of homes coming to market rose by 44.4 per cent while the volume of property sales was down 5.6 per cent compared to last year, however, the average price is up 7.9 per cent compared to last year. These figures can be attributed to the rush to have properties marketed quickly before the LBTT holiday ends.
The Scottish property market remains ‘exceptionally busy’ as properties experienced a notable increase in average selling price. Additionally, the number of homes coming to market is still significantly up compared to last year.
However, as is expected for this time of year, the seasonal lull in house buying and selling is taking place. This is leading to concern that without an extension to the LBTT holiday, this lull will continue into the New Year and with the worry that consumers will miss being able to make the most of the LBTT reduction when the market picks up again.
This will cause movers to apply pressure to complete transactions by 31 March 2021 to benefit from the changes to LBTT. Failure to complete those transactions could see the breakdown of chains with consumers potentially financially unable to continue with the purchase, as they would have to find funds to pay LBTT.
Property Sector Support Package
Propertymark is calling for an extension to the property tax holiday to avoid transactions falling through, price falls, and a sudden loss of momentum in the market:
- Homeownership provides an increased sense of stability and security to people’s lives and the local communities in which they live.
- Since the introduction of the cut to Stamp Duty/Land Transaction Tax/Land and Buildings Transaction Tax, the housing market has excelled
Moving to a new home has enormous knock-on benefits for the wider economy and a continued holiday on property tax would increase consumer confidence and encourage both upsizing and downsizing.
Extending the cut to property taxes would continue to support jobs in the sector and the wider economy and #keepthemarketmoving.
