Ken McEwan, chief executive of Edinburgh-based estate agency, McEwan Fraser Legal says we all face having to pick-up the tab for what he has condemned as the Scottish Government’s “botched” Land and Buildings Transaction Tax (LBTT) as he appeals for urgent reform.

When the Scottish Government introduced the Land and Buildings Transaction Tax as a replacement for Stamp Duty in 2015, I predicted demand for second homes and buy-to-let properties could fall by up to 50 per cent. It gives me no great pleasure to report that I was right.

Our most recent sales figures show that, in the first year of the tax, sales in those categories halved. We have also seen a 25 per cent drop in demand for homes worth over £500,000 and a fall of 40% in demand for £1 million plus properties. At this end of the market we’re witnessing a virtual stagnation.

The Scottish Government introduced the tax as a copycat measure for a similar levy introduced by the Conservative Government at Westminster.

The LBTT imposes a charge of 2 per cent on homes worth more than £145,000 up to 12 per cent on those which sell for more than £750,000. Buyers of holiday homes, buy-to-let properties and other second homes are charged an additional 3 per cent under the Additional Dwelling Supplement (ADS).

Such punitive rates could be justified in England, particularly in the South East, where there’s a problem with first time buyers gaining a toehold on the property ladder due to inflated prices.

Ministers have a particular policy ambition of cooling down the London market which is distorted by the presence of rich, foreign owners many of whom don’t even live in the properties they buy.

In Scotland the market is entirely different; houses are more affordable compared with average earnings and there’s a shortage of rental property. In the major cities such as Edinburgh, it’s difficult to secure a rental property. Students, professionals, foreign nationals and those on benefits are all competing for the same available rental lets.

The Scottish Property Federation (SPF) has calculated that revenues generated by the LBTT in the past year are £57m down on Scottish Government forecasts because of fewer sales.

Before its introduction, ministers estimated the tax would raise £1.8bn from residential sales by 2021. That has since been revised down to £962m, a drop of 46%.

Any school pupil studying economics will tell you that when taxes rise, consumers change their behaviour accordingly, so it should be no great surprise to ministers that homeowners, faced with a massive increase in the cost of moving house, are opting to stay put.

The Royal Institution of Chartered Surveyors (RICS) said last month that the property market in Scotland was ‘stagnant’ with a fall in the number of new instructions.

A survey by The Halifax, published this week, shows that planning applications for home extensions have risen by 183% in the past five years as homeowners opt to upgrade their existing properties.

Someone buying a home worth £400,000 faces a transaction tax bill of £25,300 which is seen by many as a massive disincentive to move, particularly if they haven’t yet sold their own property.

Buyers earning £50,000-a-year will have to raise the equivalent of their annual salary just to meet the cost of the property tax. It’s clogging up the market right across the property bands.

In June Derek Mackay, the Scottish Finance Secretary hinted at the prospect of a u-turn on the tax by raising the thresholds at which the bands kick-in but there has been no word since and the longer he sits on his hands, the more the slowdown will persist.

The greatest negative impact has been on the purchase of second homes and buy-to-let properties. Tax revenues are small compared with the high risks of restricting liquidity in the buy-to-let market and the knock-on effects on other businesses that rely on a buoyant property market.

Before the LBTT and the ADS were introduced, a Council of Mortgage Lenders survey showed that 79% of properties bought with a buy-to-let mortgage were for those worth less than £145,000.

It was clear then that the introduction of the ADS, which had no consideration for progressive bandwidths, would significantly add to transaction costs and undermine market liquidity.

Though definitive figures have yet to be published, anecdotal evidence suggests the effect has been to reduce the number of buy-to-let landlords, unwilling to take on the extra cost, and to increase rents to cover the rising costs of ownership.

Some landlords with highly-geared portfolios have made losses and are in the ridiculous position of having to pay tax on those losses. This has happened at a time when they have had to weather changes to the Private Housing (Tenancies) Bill, based on improving tenant rights with no consideration for the financial risks and challenges faced by landlords from rogue tenants.

Many landlords are taking the view that they’ve had enough. The LBTT and the 3 per cent ADS are part of a bigger picture which also includes significant reductions in mortgage interest relief and the removal of 10 per cent ‘wear and tear’ relief.

With a significant reduction of available lets in the private rented sector, the Scottish Government will be forced to meet that housing shortage at considerable cost to taxpayers.