In March, average house prices in Scotland rose by an average £9,200, or 5.4%, according to the latest house price index for Scotland from Your Move and Acadata.
This is the highest increase seen in a single month, as recorded by the Registers of Scotland since its database became fully operational in June 2003.
The report said the reason for this exceptional rise in average prices is tax-related; the new Land and Buildings Transaction Tax (LBTT) came into force on 1 April 2015. Prior to this date, the Stamp Duty Land Tax (SDLT) rates applied, which had last been amended on 4 December 2014. Anyone purchasing a property after 1st April 2015 – and costing in excess of £254,000 – would be required to pay more tax under the incoming LBTT rates than under the established SDLT rates. There was therefore a tax advantage to be gained in bringing forward the purchase of such properties into March 2015, or even earlier.
Christine Campbell, regional managing director of Your Move, said: “In what would have been an unimaginable trend just a year ago, house prices are now rising faster in Scotland than in London.
“In part this is due to a short-term scramble to avoid the new Land and Buildings Transaction Tax, or the LBTT, put in force by the Scottish government as of 1st April. For the top of the market especially, a pre-deadline rush has boosted the average price paid in March, so the latest surge in prices is unlikely to be sustained to quite the same extent in April under the new regime.
“Yet even before the one-off effect of looming tax changes, Scottish house prices were rising on an annual basis by 6% in February, already on a par with 6.8% south of the border. As prices cool across the rest of Britain, Scotland has seen the opposite trend, with prices accelerating upwards.
“Once the new tax regime has become an established feature of the property market, the effects could be different again. On the face of things, there are clear benefits for those buying a home for less than £254,000 as they will have to pay less tax than under the old system. But it remains to be seen if this will be quickly countered by higher prices for these properties, as buyers with a little more buying capacity just bid up the average price for these homes. On the other hand, by far the clearest effect is already for the top of the market – there were a record number of million pound transactions in March as wealthy buyers rush to save thousands before the onset of the new law. So while the majority of Scotland’s property market is likely to maintain its acceleration as we approach the summer, the next set of figures will almost certainly be held back artificially by a relatively sluggish top-end.
“Regional patterns illustrate this sprint finish for buyers of the most expensive properties. In Edinburgh, prices have jumped by an extraordinary £27,240 within a few weeks, going from £249,396 in February this year to stand at £276,636 in March. This 10.9% change in a single month takes Edinburgh property prices far beyond any previous record, while neighbouring East Lothian saw the biggest monthly price surge in percentage terms – up 11.8%.
“This is not a normal market and there will be a comparable bump on the other side, as the new tax takes hold. But there is also an optimistic vibe underlying this turbulent few months for Scotland’s property market.”
