Warning of property market stagnation

A leading consultancy has warned of stagnation in the high-end commercial and private property market.

Alasdair Humphery, lead director of property at JLL in Scotland, had been negatively impacted by the introduction of the Land and Buildings Transaction Tax (LBTT), a measure that was introduced by the Scottish Government two years ago.

New research by the Scottish Property Federation found that LBTT across all sector generated revenues of £481.1m in 2016-17, 10.6% below the Scottish Government’s forecast.

The introduction of Additional Dwelling Supplement (ADS), which taxes commercial and residential owners on second properties, is thought to have boosted LBTT figures significantly, but not enough to meet targets.

“We’ve now passed the two-year anniversary of LBTT and it is clear to see a negative impact on Scotland’s property market,” Mr Humphery said.

“The latest Scottish Property Federation figures suggest that the most recent tax targets set by the Scottish Government have fallen short by around £60 million with commercial property receipts well down on last year’s tally and behind expectations.

“For too long, commercial property receipts have been used to balance out an underperforming residential market, caused by heavy handed taxation particularly at the middle and top ends of the market.

“Homeowners are facing further obstacles to sell their homes in the £325,000 to £750,000 bracket, with a 10 per cent tax handed to buyers.

“The tax has undoubtedly stifled within this bracket, especially in central belt cities where homes are more expensive.

“Mid-market transactions, which are typically the life blood of any property market, have been restricted by this broad banding, making it hard for people to either buy larger homes or downsize to smaller ones.”

The commercial property market has stagnated, according to JLL.