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Scottish property market still seen as a good investment despite tax changes
The Scottish property market is still adjusting to political and taxation changes but overall remains an attractive place to invest in real estate, according to a new analysis report. Scotland remains comparatively good value for money, and this is the key driver in the majority of buying decisions but the introduction of Land and Buildings Transaction Tax (LBTT ) in April has had an impact. It has contributed to the growth of Scotland’s mainstream residential market, but delayed the recovery of the prime sector in the medium term, says the report from real estate firm Savills. However, Edinburgh is the exception to the rule, where the prime market is attracting buyers from London and overseas who remain cautious about investing outside the capital and the report says that one year on from the Referendum on Scottish Independence, there has been a notable transfer in balance within the residential property market north of the border, with a shift to bottom up growth. The report explains that during the summer of 2014, the Scottish property market was recovering from the economic downturn. The prime residential market was leading the way in the resurgence, with a growing demand for properties above £400,000, particularly in key property hotspots. Consumer confidence was beginning to ripple out, both to other locations and to lower price bands. However, the Referendum raised a number of difficult questions, and the resulting uncertainty stalled the property market. ‘This was felt acutely at the top end, the bracket that had long been boosted by the prevalence of London buyers. A year on, this key target group remains anxious about LBTT and the forthcoming Scottish Rate of Income Tax,’ said Faisal Choudhry, director of Scottish residential research at Savills. ‘In addition, both UK and Scottish Governments have introduced initiatives to support the lower value sector of the market in an attempt to revive both the house building industry and buyers on the early steps of the property ladder,’ he said. ‘Buyers of homes below £400,000 are now receiving further assistance in the form of favourable rates of LBTT. Meanwhile, buyers of more expensive homes are taking on the burden of the new progressive taxation in Scotland,’ he added. The report says that Scotland’s million pound market has felt the biggest brunt of the new taxation changes. The vast majority of sales in this bracket completed prior to 01 April, before LBTT was introduced. While there has been a slight uplift in activity in recent weeks, sales have mostly been focussed on the core locations of Edinburgh, East Lothian, East Renfrewshire and East Dunbartonshire and also in Aberdeen, which saw the most expensive sale since April this year at £2.78 million. ‘As the economy improves, and buyers from both sides of the border adjust to the new taxation structure, we expect this upward trend to continue. While the million pound market is beginning to recover in Scotland’s capital, buyer activity in more provincial locations remains subdued,’… Continue reading
Court ruling means UK new home targets are more difficult, it is claimed
A land broker has warned that a recent High Court ruling lessens the likelihood of the UK ever hitting its house building targets. Following a legal challenge by Reading Borough Council and West Berkshire District Council, the ruling by Justice David Holgate forced ministers to scrap guidance which excluded developments of 10 homes or fewer from the requirement to provide or contribute to affordable housing provision. The Department for Communities and Local Government (DCLG) has said it will appeal the High Court’s ruling. However, according to Home Counties land broker Aston Mead it will lead to fewer homes being built as a result. ‘It has already stopped a stack of proposals in their tracks and a lot of sites in our pipeline are now being renegotiated,’ said Aston Mead director Adam Hesse. ‘Sites that may well have been suitable for 10 units will now be reduced to whatever the new threshold is, so full use won’t be made of the brownfield land available. Consequently it will mean less income for districts and boroughs, the very same organisations fighting for a change to the guidance in the first place. It’s utter madness,’ he added. He also pointed out that the contribution that small developers make to the house building programme should not be underestimated. ‘Small sites are the engine rooms of UK development. They are invariably built by small firms who have proportionately higher costs. The economic viability of their schemes is often on a knife-edge, with little ability to challenge local authority demands for affordable housing,’ said Mead. ‘This latest ruling now means that they will simply give up trying to build on certain sites, leading to fewer homes of all types. What’s more, small and little used commercial sites which could be more productively turned over to residential housing won’t even be attempted,’ he explained. ‘The country desperately needs more homes. It is already falling far short of current house building targets. A ruling like this is a significant blow for smaller residential developers and will only serve to ensure that those targets are even harder to meet,’ he concluded. Continue reading
Lending for UK buyers sees growth, especially for first time buyers
House purchase lending in the UK increased by 9% in July compared to the same time last year with the economic outlook allowing more people to enter the property market, according to the latest data. The figures from the Council of Mortgage Lenders show that first time buyers saw a month on month increase by volume and by value in activity compared to June and a year on year rise compared to July 2014. Home mover lending saw larger monthly and annual increases than first time buyers by volume and by value but home owner remortgage activity saw a slight dip month on month but substantial increases when compared to the same month in 2014. Buy to let continues to grow year on year and month on month, mainly driven by buy to let remortgage activity, the CML data also shows. ‘The market has shown steady growth in house purchase and buy-to-let over the past few months with general improvements in economic factors across the UK allowing for more people to enter the property market,’ said Paul Smee, director general of the CML. ‘This positive direction of travel going into the autumn months reinforces our recent revised forecasts that lending levels should continue to grow gradually over the rest of the year after a subdued beginning of the year,’ he added. House purchase lending in the UK saw its third consecutive month on month growth by volume and by value in July. This was also the second month that volumes and values increased compared to the same month in 2014. As previously reported, UK gross lending in July totalled £21.7 billion, up 8% on June and 12% up on July last year. Overall in July, the value of home owner loans for house purchase accounted for 56% of gross lending, while remortgage activity accounted for 24%. The rise in the number of loans for house purchase in July was driven by both first time buyers and home movers. However, the increase in volume and value terms for home movers was much stronger than for first time buyers. This was the highest monthly lending level by volume since November 2007, and by value the highest monthly level since October 2007. Nevertheless, first time buyers took up 45% of total house purchase lending, which continues to make up a larger proportion of activity than pre-crisis levels when it made up as little as 30% of the number of loans for house purchases. Buy to let as a proportion of total lending was 18% in July. It was the highest monthly first time buyer lending level by volume and value since August 2007. The proportion of first time buyer gross household monthly income in July to service the capital and interest rate payments of their mortgage rose slightly from 18.3% in June to 18.5%. This is still lower than in July 2014 when it was 19.5%, and much lower than… Continue reading
