Average house prices across Scotland fell by 1.4% in 2016 – as the figure was sucked down by the slump in the Grampian area caused by thousands of job losses from the N. Sea oil and gas industry.
After four years of positive house price growth, 2016 saw economic and political factors combine to produce negative price growth once again.
According to Land Registry data, overall market activity levels in Scotland were slightly up on the previous year, and would have been more positive but for falls in Aberdeen city and shire.
In Dundee, turnover (the number of properties bought and sold) was up 15% year on year, and Glasgow turnover was up 3.5% while Edinburgh remained flat.
But in Aberdeen turnover was down by around -25%, which dragged national growth back from 5.4% to 1.1% .
The Scottish market saw a 5.4% increase in market turnover, if you exclude the ongoing troubles in the Aberdeen market, which dropped 25% year on year.
Slowing activity in prime private residential property markets due to the high-rate of stamp duty imposed by the Scot-Govt and <energy industry> issues in Aberdeen also constrained otherwise positive market growth.
Indeed, LBTT – the new high-rate property tax which is levied at 5% on all dwellings sold at more than £325,000 – has totally stymied the market.
Sales of property in this category have slumped by 77% from April 2015 to April 2016 – when the ‘Swinney Stamp Tax’ came into effect by the SNP-led Scot-Govt.
It has so dramatically scythed down the market that the Swinney Stamp Tax raised £35 million LESS than predicted by the Scot-Govt.
While the impact is greatest in the high price brackets, there is a clear slowing year-on-year across the rest of the market. This change is partly due to the limited stock coming to the market, preventing families from moving up the ladder.
There are obvious implications for market health and tax revenue from stalling transactions and this has led the Scottish Property Federation to propose moving the 5% threshold up to £500k (from £325k), reducing the burden placed on family buyers in the main cities.
The Scottish Property Federation remains concerned that through not lifting the threshold for the 5% band of residential LBTT from £325,000 to £500,000, the economy will see reduced transactions at this level which will also limit more valuable transactions.
The supporting documents in the budget confirm a current expected shortfall of some £74 million that the SPF believes is attributable in some measure to the high 10% rate at properties in the £325,000 to £750,000 range.