Scots housing market bucks UK trend, but concerns remain on ‘adverse’ LBTT effect

House prices are set to rise in Scotland, with sales expectations remaining positive despite ongoing concerns about a lack of stock, the October 2017 RICS UK Residential Market Survey has found.

However, concerns remain over the impact of LBTT on the higher end of the market, with surveyors reporting that the tax is “prohibitively high” and “having an adverse effect”.

The Scottish market bucked the UK trend in October, as the national housing market continued to stutter in October, with both demand from buyers and agreed sales declining once more, while price trends are now flat.

Across the UK, interest from buyers continued to decline in October, with 20 per cent more respondents seeing a fall in new buyer enquiries over the month. Agreed sales were also reported to have fallen again with 20 per cent more respondents noting a decline in transactions over the month at the national level.

Scotland, Wales and the North East were the only areas to see any pick-up for agreed sales, while sales trends were either flat or negative across the countryrest of the UK.

Hew Edgar RICS policy manager, Scotland, said: “While a rise in new enquiries and positive sales expectations are to be welcomed, this survey again underlines the concerns RICS has raised regarding the current LBTT bandings and the bottleneck they are creating in certain areas of the market. With a lack of housing stock being a pressing issue, a tax regime that can encourage property owners to eschew moving in favour of improving their current properties stymies the market and compounds housing stock issues.

“RICS has been consistent in its call for a tax system that encourages fluidity in the market The Scottish Government must address this problem by reviewing the LBTT framework and putting in place a structure that would inject some much-needed fluidity into the market.”

Simon Rubinsohn, RICS chief economist, added: “The combination of the increased cost of moving, a lack of fresh stock coming to the market, uncertainly over the political climate and now an interest rate hike appears to be taking its toll on activity in the housing market. With both buyer enquiries slipping and sales expectations also subdued, the sense is that home owners are staying put and first-time purchasers are increasingly focusing on that part of the market supported by the Help to Buy incentive. A stagnant second- hand market is bad news for the wider economy not just in terms of spending but also because it restricts mobility.

“Prices do now seem under pressure at the more expensive end of the market with a further rise in the number of properties transacting at below the asking price. But it is important to not characterise the whole of the market by what is happening in parts of London and the wider South-East.”