Scottish million pound market hammered by new property tax, says Savills

However, the new analysis by the real estate specialist, reveals this market is now less concentrated in Edinburgh and the Aberdeen area, with more activity spreading out to the west and other regional locations.

While Edinburgh remains the hub of the million pound market, the Capital has seen a drop in transactions at this level, with 33 such sales recorded in the first six months of 2017 compared to 45 last year.

In addition, at the height of Aberdeen’s oil-dependent residential market, the area generated the second highest level of transactions after Edinburgh. However, there were only five million pound transactions during the year ending June 2017, including just one in 2017, in a period characterised by uncertainty in the energy sector.

Meanwhile, there has been a spreading out of transactions to other locations. Greater Glasgow’s million pound market has had a stronger 12 months, with 28 annual transactions taking place during the year ending June 2017 compared to 20 during the year ending June 2016. The West End, Park, Pollokshields and Bearsden were the stand out locations.

Other headliners include the buoyant East Lothian market, which saw eight annual transactions and also Perthshire where the Tower of Lethendy, on the market for £4.6 million, achieved the highest residential transactions price in Scotland since 2007. In addition, Brackenbrae House in Broughty Ferry became Dundee’s first ever million pound transaction earlier this year.

Faisal Choudhry, Savills head of residential research in Scotland, said: “Last year the million pound market seemed to be absorbing the punitive rates of LBTT better than other price bands. However, the taxation malaise is now spreading into this market”.

Only 56 transactions have taken place in the first half of 2017, compared to 79 during the same six month period last year.

According to Savills research, the LBTT tax on a £1 million residential property is £78,350 for a main home or £108,350 for an additional property. This is in sharp contrast to the rest of the UK, where the tax on a £1 million residential property is £43,750 for a main home or £73,750 for an additional property.

Mr Choudhry added: “LBTT is putting buyers in Scotland at a distinct disadvantage, and will do little to attract wealth from outside Scotland.

“The structure of LBTT relies heavily on the top end of the market, but buyers are being dissuaded from making offers due to punitive rates. Furthermore, fewer prime properties are being launched on to the market in Edinburgh, from where LBTT generates a significant level of revenue. The Scottish Government’s ambitious LBTT targets will not be achieved unless there is a significant change in rates.”