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New property tax rates for Scotland announced
A new Land and Buildings Transaction Tax (LBTT) is set to replace Stamp Duty (SDLT) for Scottish residential and non-residential property sales in April of next year. LBTT, which received Royal Assent in the summer of 2013, is part of the Scottish Government’s devolved tax raising powers and was not dependent on the outcome of the referendum and applies to Scotland only. The rates announced by the Cabinet Secretary for Finance, John Swinney, mean that many home owners at the lower end of the property market in Scotland will be better off when the progressive tax replaces the much criticised Stamp Duty which is a slab tax. In a move designed to help first time buyers, the threshold for LBTT is set at £135,000, up from the stamp duty threshold of £125,000. A marginal tax of 2% would apply to the proportion of a transaction between £135,000 and £250,000, while a 10% rate will apply to those between £250,000 and £1 million. There will be a new 12% tax on properties costing more than £1 million. ‘As a result of the rates I have announced today, nobody will pay tax on the first £135,000 of their house purchase. Some 5,000 more transactions will be taken out of tax, supporting first-time buyers and those buying properties in the affordable market,’ said Swinney. But others will pay more. According to Savills Research, buyers in Edinburgh, where an average family house costs around £363,000, will be paying £13,600 in tax under the new system, which is 25% more than they would have paid in Stamp Duty. Buyers of properties of £450,000, will now pay 65% more at £22,300. Taking all properties into consideration across Scotland from above £125,000, the new LBTT payments on residential property transactions will be on average 56% more than the existing stamp duty. ‘We welcome a progressive new system and the fact that the majority of home owners will be better off. When compared with other parts of the UK house prices in Scotland remain comparatively low. However for some sections of the market the new rates are not good news, and it comes at a time when the Prime Scottish market is only just beginning to recover,’ said Savills head of residential in Scotland Andrew Perratt. ‘Young families who need to live in the prime hubs of Edinburgh, Aberdeenshire and Glasgow’s west end, where average house prices are considerably higher, the proposed increases are so punitive they may discourage many buyers from moving. In view of this, we anticipate increased market activity between now and the spring, whereby buyers are likely to make quick and committed decisions before the new tax comes into force in April,’ he explained. ‘With the referendum now behind us, the Scottish market has been poised for a healthy recovery. However this relies on activity at both ends of the market, not just from first time buyers, and the new tax will… Continue reading
Technology could help combat mortgage fraud, it is claimed
Half of UK mortgage brokers believe greater use of technology by lenders when carrying out due diligence on borrowers would reduce mortgage fraud, according to new research. Lying about occupancy to gain a mortgage on a buy to let property was the most common type of fraud that could be reduced by more use of technology, according to 46% of respondents to the survey carried out by online property data network EDM Mortgage Support Services. Other types of fraud that could be reduced by more technology cited by brokers include income or employment falsification, 44%, concealing debts and liabilities, 39%, identity theft at 37%, obtaining multiple loans on the same property, 34%, and over valuing properties at 24%. Despite this, only 17% of brokers believe lenders are implementing enough technology to deal with fraud. Some 35% of mortgage brokers say the Mortgage Market Review (MMR) has not reduced the chances of fraud at all while another 2% say it has actually increased it while 56% believe the MMR has reduced the chances of fraud. ‘The argument for more use of electronic data and communication is getting stronger, not just as a result of the greater administrative burdens resulting from MMR but other issues too, such as tackling fraud,’ said EDM MSS managing director Joe Pepper. ‘There is already some use of electronic data exchange, more than a third of the brokers in our survey say they between 81% and 100% of the information/correspondence they exchange with lenders is done so electronically,’ he pointed out. ‘But there is potential for this to be much greater and more extensive use of quality online systems would help the mortgage industry deal much more efficiently with large amounts of data and correspondence,’ he added. EDM Group is investing in EDM MSS to further enable it to capitalise on the growing data exchange and technology needs in the mortgage and property sectors. Continue reading
Prime property prices in Edinburgh up for fifth quarter in a row
Property prices in the Edinburgh City prime market rose for the fifth consecutive quarter between June and September despite a slowdown due to the referendum vote. Prices increased by 1.3% and are 4.9% higher on an annual basis and so far in 2014 transactions are 8% higher than a year ago, according to the latest report from real estate firm Knight Frank. Low stock levels and high demand are the main two characteristics which have typified the Edinburgh market so far this year and they have put upwards pressure on price. A snapshot of stock levels at the end of September reveals that there were 27% fewer properties available for sale than the same time last year. However, applicant numbers were 19% higher in 2014 to date compared to 2013 and viewings increased by 1% over the same time. According to Knight Frank, it is evidence of just how resilient the Edinburgh property market has been this year in spite of the uncertainty surrounding the outcome of the referendum. Indeed, agents reported activity only noticeably slowed in the three week period before the vote. Since the result was announced activity has returned to more normal levels, suggesting that at least for now it is back to business as usual. The result means there is now a more certain environment for the property market to function and it is expected that this, combined with growing consumer confidence, should act as a further boost for the city’s already robust prime market. ‘While the flurry of activity that was predicted in the event of a No vote hasn’t materialised yet, we have dealt with a number of buyers and vendors who put off making decisions until after the vote,’ said Edward Douglas-Home, head of Edinburgh City sales at Knight Frank. ‘The recent figures highlight just how buoyant the Edinburgh market has been. Premiums have been paid for the very best homes in the best locations and high demand from would-be buyers is evident across the market. We expect that activity will continue to pick up in the coming months,’ he explained. However, despite the optimism in the market, the market has more hurdles to clear, most notably the ongoing negotiations between Holyrood and Westminster concerning further devolution and the upcoming May 2015 UK general election could create more uncertainty, especially when it comes to tax changes affecting high-value residential property. Additionally, from April 2015, Stamp Duty for Scottish residential and non-residential property sales (SDLT) will be replaced by a new Land and Buildings Transaction Tax (LBTT), which will be administered and collected within Scotland. Guidance surrounding the final rates will be provided this month, but it is expected that buyers of more expensive homes will have to pay more tax up front when purchasing a property. Meanwhile, the No vote in the referendum could Now that the uncertainty of the referendum is over there could be a rise in the number of people from London who would rather own property in Edinburgh and commute,… Continue reading
