MOV8 Real Estate’s 2015 Review of the Year – Scottish Property Market
2015 has certainly been an eventful year for the Scottish property market! With Stamp Duty being replaced by a new property tax on 1 April 2015, interest rates remaining unchanged for a record length of time, sales at their highest level in almost a decade, and house prices continuing to rise, we have certainly had plenty to write about in this Blog. For a round-up of some of the headlines of 2015, read on!
A New Property Tax
After much discussion, Land & Buildings Transaction Tax (LBTT) was finally introduced on 1 April 2015, replacing the old Stamp Duty system. Most property buyers have benefited under the new system, with a significant majority of buyers paying no tax or facing a lower bill than they would have under Stamp Duty.
For everyone buying a property under £333,000, the amount of tax that they pay under LBTT is either unchanged, or less than they would have paid in Stamp Duty. Once you get above that mark, the amount of tax paid under LBTT exceeds what would have been paid with Stamp Duty, with the differences becoming more significant the further up the property ladder you go. As you’d expect, that led to a rush of sales at the upper end of the market immediately prior to the introduction of LBTT, with buyers looking to minimise the amount of tax they pay.
The ink was barely dry on this new legislation when, in December 2015, the Scottish Government also announced changes to LBTT for Buy-to-Let investors or for people buying a second home.
Scotland’s Finance Secretary, John Swinney, announced that anyone purchasing an additional property, for £40,000 or more, from 1 April 2016, will have to pay an additional 3% of the total purchase price of the property, on top of the existing LBTT. The announcement echoes the similar tax announced for England and Wales by the UK’s Chancellor of the Exchequer, George Osborne, in November 2015.
As with many of these announcements, the full details of the scheme are yet to be released and the devil truly will be in the detail. At the moment, the plans probably raise more questions than they answer. It is clear that the proposals are aimed at Buy to Let landlords, however the effect might extend to those people who are simply hoping to ‘Let-to-Buy’. In other words people who remortgage their original home, buy a new home using the equity that they released by remortgaging and who then rent-out their original home. Whatever happens, the new tax will apply to purchases where the ‘completion date’ or ‘Date of Entry’ (not the date when the sale is actually agreed) is 1 April 2016 onwards, so we would encourage anyone who is thinking of selling a property that might appeal to a Buy-to-Let investor to get in touch with us as soon as possible to take steps to get their property onto the market.
For more information on the effect we think this might have on the property market, check out our predictions for 2016.
Property Sales Highest for Over a Decade
As we inch towards the end of 2015, property sales across Edinburgh and the Lothians have remained strong. Throughout the year, the number of homes changing hands has been at its highest level since the onset of the ‘credit crunch’ in 2008.
For the second year in a row, more people have trusted MOV8 Real Estate to sell their property than any other Solicitor Estate Agent in Edinburgh and the Lothians. Over the course of 2015, MOV8 has sold over 1,200 properties and has put over 1,100 on the market. Between January and November 2015, the number of properties MOV8 sold was 28% higher than the same period in 2014, well above the ESPC reported increase in the number of sales for east central Scotland of 11.8% year on year.
This is something we are extremely proud of, and we are looking forward to helping even more property selling clients in 2016.
One of the most significant trends we have experienced during 2015 is that house prices are continuing to head north, with an increase of 6% from £202,037 to £214,172 across east central Scotland, for the months of January to November 2015, according to the latest statistics released by the ESPC. Across Edinburgh itself, the average property price, in the same period, rose by 6.8% annually, from £214,813 in 2014 to £229,374 this year.
There are sections of the market where prices are rising more quickly than the average. For example, ESPC statistics released for August to October 2015 showed two bedroom flats in Joppa and Portobello have seen an increase of 16.5% from £167,691 to £195,332, year-on-year, whilst one bedroom flats in the areas of Polwarth, Shandon and Tollcross have seen an increase of 10.7% from £145,400 to £160,882 as these areas become increasingly popular with First Time Buyers.
Caution of course must be exercised when looking at these statistics as the mix of property types sold in the periods of time being compared might have changed, for example, skewing the figures slightly.
However, the overall increase in property prices in east central Scotland is a trend that has continued throughout the year and should be a cause for continued optimism. Check out our predictions for the property market in 2016.
‘Help to Buy’ ISAs
One big piece of news to come out from the Budget in April 2015, at least as far as the property market is concerned, was the announcement of the introduction of ‘Help To Buy’ ISAs. The scheme allows first-time buyers to save up to £200 per month in the ISA, with the government topping this up with a further 25%. That is to say, the government contributes £50 for every £200 saved.
The aim of the scheme is to help more people to get onto the property ladder and, in that respect, it is likely to be successful. In the future, it will be equally important that we see more efforts being made to increase the number of new, affordable homes being built. The number of households across Edinburgh and the Lothians is projected to rise significantly in coming years and it will be important that enough properties are built to meet this demand if we are to keep house price inflation at a sustainable level.
Interest Rates Remain Historically Low
The Bank of England’s Monetary Policy Committee (MPC) has again voted to keep the Bank Rate at 0.5%. The rate has now stood at this historically low level for over six years as the Bank has tried to encourage consumer spending to stimulate economic activity. The Bank has reduced their outlook on estimated economic growth in 2015 from 2.8% to 2.7%, whilst cutting the outlook on economic growth in 2016 from 2.7% to to 2.5%. This means that an increase in interest rates is less likely in the immediate future.
For more of our predictions on when interest rates might rise, check out our 2016 predictions.