Second homes tax ‘weakening’ property market by driving landlords out
An estate agent has bemoaned tax changes for second homeowners for “driving landlords out” of the private rented sector and triggering a sell-off by investors.
A 3% supplement to the Land and Building Transaction Tax (LBTT) for second home purchases over £40,000 was introduced by the Scottish Government from April 2016. The move was estimated to raise between £17 million and £29m in 2016/17.
New research by Aberdein Considine shows that almost two thirds of homeowners have been put off investing in a second home due to the levy.
The property experts claimed that the additional tax – together with the staged withdrawal of relief on mortgage payments by Westminster – is starving the sector of new landlords and pushing many to offload stock.
The firm said the changes have weakened demand for homes in some parts of Scotland by flooding the market with stock.
Its quarterly Property Monitor report reveals that sales fell in 17 of Scotland’s 32 local authority areas during Q4 of 2017.
Jacqueline Law, managing partner at Aberdein Considine, said a perfect storm of tax and legislation changes has left many landlords running for cover.
“There has been a significant change in the Scottish property market in the last six months and it is gathering pace,” she said.
“By targeting landlords, politicians north and south of the border are squeezing one of the biggest and most powerful buying forces out of the Scottish property market, which is already affecting sales in certain areas.
“In the Central Belt, there is enough pent up demand from owner-occupiers to cope with any extra stock coming to the market, so prices are still inflating at pace in places like Edinburgh and Glasgow.
“However, there are other parts of the country where an overprovision of stock could weigh down property values – creating a great market for first-time buyers but really tough conditions for homeowners looking to sell.”