Scotland’s home building industry has expressed its concern over the impact that the Land and Buildings Transaction Tax (LBTT), introduced a year ago, is having on the wider housing market.

Responding to a call for evidence from the Scottish Parliament Finance Committee, trade body Homes for Scotland highlighted the detrimental effect that the tax was having at the middle to higher end of the market with the ten per cent band payable from £325,000 – a stark contrast to the position south of the border where that rate only becomes effective on purchases over £925,000. 

Director of Policy Karen Campbell (right) said:

“The impact of the new rates and bands varies between market segments but a real additional burden has been placed on some buyers and this is clearly affecting sales as many people are choosing not to move as they find the cost too high. 

“There is also a disproportionate effect in regions such as Aberdeen, Aberdeenshire and Edinburgh where the average family home commonly exceeds £325,000.”

Highlighting the problem, Campbell pointed to an example of a four bedroom family home in Edinburgh costing £475,000 with a LBTT payable of nearly £21,000 - £6,600 more than what was due under the previous Stamp Duty system and £7,100 more than in England.  She added:

“Given that people purchasing at the higher end of the market tend to be discretionary movers,  meaning they are choosing to move rather than having to because of circumstance, our concern is that, by staying put, they block others from progressing onto or up the property ladder and thus exacerbate the country’s housing crisis. 

“That is why we are suggesting that the current five per cent band be extended up to the price ceiling of £925k, mirroring the position south of the border to help ensure Scotland remains an attractive place in which to invest.

“This is all the more important given the fact that LBTT generated lower than expected receipts from housing transactions in its first year, with the gap plugged by income from the non-residential sector.  It remains to be seen if this could be achieved again given the already evident post-Brexit impact on commercial property investment.”