A new tax brought in to replace stamp duty is holding down house prices on the west coast, according to a leading estate agent.
The introduction of Land and Buildings Transaction Tax (LBTT) has been hailed by a Scottish Government Committee as an “operational success”.
However Bell Ingram says the market picture is a complex one, with a range of effects being reported.
One buyer in Perthshire had to pay £130,000 in property taxes. Carl Warden, of Bell Ingram’s Perth office, said: “We recently sold a property at £1.15m and the LBTT was £96,350, compared to stamp duty in the rest of the UK at only £58,750 – that’s a £37,600 difference.
“This transaction also attracted an additional 3% second home tax of £34,500, which was a grand total of an eye watering £130,850 in purchase taxes.”
LBTT was introduced in Scotland in April 2015 in place of UK Stamp Duty Land Tax (SDLT), with the aim of being designed so that the tax charge is more proportionate to the actual price of the property.
Will Banham, of Bell Ingram’s Oban office, said LBTT has also had unusual and unintended consequences for the west coast of Scotland.
Mr Banham said: “While LBTT has had a dampening effect on the country house market, the real impact on the west coast has come from the 3% premium for second homes.
“Much of the market across coastal Argyll and the Inner Hebrides is heavily dependent on incoming buyers, a significant proportion of whom are seeking a holiday home. A traditional west coast bothy of £140,000 will attract no LBTT, but a second home buyer will pay tax of £4,200.
“This tax was designed to make property more affordable for first time buyers but, in practice, many of these properties would be totally unsuitable for permanent occupation due to their basic accommodation and remote locations.
“This has simply caused downward pressure on prices, with most buyers explicitly discounting their offers by the exact amount of extra tax due. It is very much a buyers’ market, with vendors losing out.”
A Scottish Government spokesman said: “Land and Buildings Transaction Tax is fairer than the UK Stamp Duty it replaced, and has been designed to be more helpful to first-time buyers.
“In the first year of LBTT, the buyers of nearly 41,700 homes between £145,000 and £330,000 paid less tax than they would under UK Stamp Duty.
“The upper end of the Scottish housing market remains healthy, and our own analysis confirms that transactions in the £325,000 to £750,000 price band have maintained a similar share of the market in recent years.”