By David Alexander, Managing Director
Last week, sections of the national press ran two property-related stories that appeared separately and, because they concerned two extremes of the price ladder, were apparently unrelated. But by digging a little deeper, a correlation between the two soon became clear.
Story number one focused on the proposal by the Scottish Government to make all residential property transactions up to £175,000 free of Land and Buildings Transaction Tax (LBTT). At present, tax is payable on purchases above £145,000, so the thinking behind the proposal is that it will help first-time buyers get on to the property ladder and save them £600 a year, benefiting up to 12,000 people.
Therefore, so far so good; it is difficult to criticise anything that relieves the tax burden on home-buyers, especially younger people new to the market.
But then we come to story number two and the vibes are not so good. According to a survey by the website search engine Zoopla, Britain now has nearly 770,000 “property millionaires” based on the number of houses and flats worth £1 million or more and making up 2.7 per cent of the country’s total stock.
The survey says Edinburgh is one of a handful of locations where the number of £1m properties is particularly high. At the time of publication, Edinburgh was said to have 4,759 houses and flats valued at £1m or above (the city average is £285,118).
However, even with the input of Edinburgh, the number of £1m properties in Scotland is lower than the British average. On a table of 11 British “regions” (note to Zoopla: the accepted term is now “nations and regions”), Scotland comes in seventh at 11,101, with Edinburgh contributing more than 40 per cent of this figure.
Perhaps particularly telling is that the Scotland figure compares with 430,720 for London. Estimates normally put the population of London as 1.75 times that of Scotland (not including those below the radar in the former). Yet according to the Zoopla figures, the UK capital has almost 40 times the number of £1m properties. Even less-affluent north-west England has more £1m properties (12,552) than Scotland.
I do not count myself as one of those happy-clappy “inflationists” in the community of property professionals; soaring prices may be good for existing home-owners but it’s bad news for anyone trying to get on to the ladder and, therefore, has an adverse effect on wider society. However, I also believe there is something slightly concerning about the relatively low number of £1m in properties in Scotland compared to Britain as a whole.
This is where the wheel turns full circle. The Scottish Government’s attempt to free more buyers from LBTT at the lower end of the property ladder is to be welcomed but ministers have refused to implement changes at the top end, where there is a pressing need for a less draconian rate. No doubt Scotland’s relatively low level of high-value properties is due to several factors, but I cannot help thinking LBTT has made a major contribution (at £78,350, LBTT on a £1m transaction in Scotland is £34,600 more than stamp duty on the same in England and Wales).
Despite a dearth of sales at the top end (a direct consequence of LBTT) the rest of the market is performing rather well right now and – given that people still have to move – perhaps the significant downturn in high-value sales is causing the middle-market to overheat. For most folk in Scotland the thought of ever owning a £1m home is “oot the windae” but equally there are those (some from very modest backgrounds) who will aspire to a home in the half-million bracket – not as a status symbol but for the perfectly natural wish to live in a nice location and with plenty of personal space.
How ironic it would be if the SNP’s squeeze on “the toffs” has actually hit voters lower down the income scale and with whom they more readily claim to identify.
This article originally appeared in The Scotsman on 15 February 2018 as ‘Why are Scots behind in the £1m homes stakes?’.