Crude oil price slump and Scot-Govt taxes sink market in £1-million homes in Aberdeen

Aberdeen: property prices under pressure
Aberdeen: property prices under pressure

A lethal cocktail of high property taxes and the ‘lower for longer’ N. Sea crude oil price slump has effectively killed off the £1-million housing market in Aberdeen.

At the height of Aberdeen’s oil-dependent residential market, the area generated the second highest level of transactions after Edinburgh. 

However, there were only five million pound transactions during the year ending June 2017, including just one in 2017, in a period characterised by uncertainty in the energy sector.

However, the new analysis by Savills reveals this market is now less concentrated in Edinburgh and the Aberdeen area, with more activity spreading out to the west and other regional locations. 

While Edinburgh remains the hub of the million pound market, the capital has seen a drop in transactions at this level, with 33 such sales recorded in the first six months of 2017 compared to 45 last year.

And recent figures released by the UK House Price Index Scotland, show house prices in Aberdeen fell by 7.8% from £178,120 in May 2016 to £164,277 in May 2017.

According to Savills research, the Land and Buildings Transaction Tax (dubbed the ‘Swinney Tax’ after the name of the SNP Finance Minister who introduced it) on a £1 million residential property is £78,350 for a main home or £108,350 for an additional property. 

This is in sharp contrast to England and the rest of the UK, where the tax on a £1 million residential property is £43,750 for a main home or £73,750 for an additional property.

A Savills’ spokesman said: “LBTT is putting buyers in Scotland at a distinct disadvantage, and will do little to attract wealth from outside Scotland.

“Furthermore, fewer prime properties are being launched on to the market in Edinburgh, from where LBTT generates a significant level of revenue.  The Scottish Government’s ambitious LBTT targets will not be achieved unless there is a significant change in rates.”

22 Sept 2017

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