House prices drop in Scotland due to new listing tax bands

House prices in Scotland fell 1.6% in April, the largest monthly fall since 2009, but sales were up 18% month on month and are 4% higher than a year ago.

It means that prices fell £3,000 in April taking the average house price to £184,970 but prices are still 14.6% higher than in the same month in 2014, according to the latest Your Move/Acadata monthly index.

The index report points out that much of the change could be due to the introduction of the new Land and Buildings Transaction Tax (LBTT) in April which saw a lot of sales in the higher price brackets pushed through to avoid paying a higher level of listing tax.

Indeed, buyers rushed through 83 sales in the £1 million plus sector in March, compared to an average of 12 in a typical month, to beat higher tax. Some 46 were sold in just three days, but no million pound homes were sold in April.

The most significant monthly downturn was found in East Lothian, where values dropped 7.2%. The islands of Orkney, Eilean Siar and the Shetlands saw the highest price increases during the month, of 9.1%, 4.8% and 4.4% respectively.

Property values also reached a new peak in the Scottish Borders, Highland, and West Dunbartonshire in April. While year on year the biggest increase in prices has been in Edinburgh with growth of 25.5%.

‘Reforming Scottish stamp duty was always going to ruffle a few feathers in the market. After a spectacular 9.4% leap during March ahead of the LBTT, average Scottish house prices subsequently fell by the sharpest fall we’ve seen since March 2009, when the housing market was at the lowest ebb of the housing crisis,’ said Christine Campbell, Your Move managing director in Scotland.

‘The Scottish housing market put on a high-octane performance in March, as high end buyers raced against the clock to snap up million-pound listing before the higher rates of stamp duty came into play. This magnified the average price paid in March, but now the market is re-focusing,’ she explained.

She pointed out that the drop in prices has cooled annual growth, which slipped from 16.3% in March to 14.6% in April. ‘However, with double digit growth still pervading, the housing recovery doesn’t appear too shaken, and this short-term hiccup has been concentrated in higher priced areas,’ added Campbell.

The data shows that there were 8,203 home sales during April, and overall, Scottish sales in both March and April have grown on 2014 levels, bucking the trend across England and Wales, where sales have been consistently falling behind on a yearly basis over the past six months.

The figures also show how the change in stamp duty in Scotland has clearly accelerated purchasing decisions to the beginning of the year. For instance, there were 237 more homes sold in Edinburgh during the first quarter of 2015 than the first quarter of last year, of which 130 were larger, detached listings. Some 96 of these changed hands in March, showing the extent of the last minute rush before the tax deadline.

Campbell pointed out that with LBTT now in place the majority of Scottish buyers, those purchasing listing for under £254,000, will benefit from lower tax costs. ‘So the momentum in the market should continue into the summer, even if prices are reined in over the short term by a slower top end until they adjust to the new banding,’ she added.

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Source: Property News Spain