SWINNEY ANNOUNCES RE-THINK ON SCOTTISH PROPERTY TAX RATES & BANDS

As mentioned in previous blogs, I was concerned when John Swinney announced the proposed LBTT rates in October as I felt the new rates were a disincentive to the middle and top end of the market and would have had a huge impact on the property market.  I am pleased that John Swinney has listened to the market and whilst his new recommendations are a step in the right direction (in that many will benefit from his new proposals), I am still of the view that the increased tax take above £400,000 will also restrict the property market.  I would have preferred to see a couple of extra bandings between £350,000 and £1m to bring the Scottish tax level slightly closer to the UK-wide level. For instance, the UK-wide level of Stamp Duty on a purchase of £450,000 is £12,500 but the new Scotland rate proposed from April 2015 is £18,350, an increase of nearly £6,000.

It will be interesting to see how the property market reacts to these amended proposals.

Lindsay Darroch
Partner & Head of Property
www.blackadders.co.uk

LIES, DAMNED LIES AND STATISTICS

I was interested to read a report from Lloyds Bank advising that the number of homeowners hit a 7 year high in 2014.  They have estimated 365,400 people moved home last year which was the largest annual increase of home movers since 2010 and the third successful annual rise.  This is a very welcome sign, however, to put matters in perspective, these figures are still at approximately half the level as seen in 2007.  Another indication of “steady as she goes”?

Lindsay Darroch
Partner & Head of Property
www.blackadders.co.uk

MIXED MESSAGES FROM MORTGAGE MARKET

I was very pleased to see a report from the Halifax advising a 22% increase in those purchasing their first properties, hitting a total of £326,500.  I am still waiting to see what percentage this is of the overall market, as readers of my blogs will know that for me 40% or above is  the magic figure and a sign of a free flowing market.

We have also had recent announcements from a number of lenders introducing very competitive 10 year fixed rate mortgages.  This is something that I have always thought should be developed further, they are cost effective and lead to certainty for both lender and borrower.  I am also seeing clients who are having considerable problems getting decisions and loan papers from lenders who are continuing to blame the MMR review for ongoing problems.

It is essential that there is a free flowing mortgage market supporting the Scottish property market.

Lindsay Darroch
Partner & Head of Property 
www.blackadders.co.uk

VISION FOR THE CITY OF DUNDEE

As readers of my blogs will know, I am a very proud Dundonian and I think what the Council has done in relation to the Waterfront is brilliant and should take Dundee to another level.  I think 2015 will prove to be another exciting year in the transformation of the City of Discovery.  We can look forward to the new railway station taking shape, more progress with the V&A and hopefully some more announcements regarding the renovation of the Wellgate Centre, which is to include a 16 screen cinema, restaurants and cafes.  I think the proposal in relation to the Wellgate will bring further life to the City Centre and hopefully increase the number of restaurants opening.

Following on from the recent announcement that the Apex Hotel has purchased Customs House with a view to creating a 5 Star offshoot, I understand they are also actively looking at creating a Conference Centre which will accommodate up to 700 people – this too will also be a great addition for Dundee.  I have also heard a whisper that a very well-known department store is looking at one of the sites at the Waterfront Development with a view to becoming an anchor tenant.  Again this would be a welcome boost to the ever increasing reputation of Dundee as a centre for shopping.

I was recently at a meeting with various people involved in the property industry and as always I was singing the praises of Dundee.  I was discussing a potential major development on the outskirts of the City and one of the issues raised was the lack of frequent London/International flights.  I do have a concern that, although the improvements to Dundee City Centre will help attract more visitors, the lack of regular flights will curtail the number of daily tourists. I would urge the Scottish Government to consider turning Leuchars into Fife International Airport with shuttle buses both to Dundee and nearby Leuchars train station. With decent sized planes, regular internal and some international flights, Dundee would gain a massive boost and could capture more day time visitors.

Apart from the issue of the airport I see significant demand for housing and hotels and I would urge the Council to focus on these areas, in particular housing. The Council needs to improve and streamline the planning process so that the housing developments the city is crying out for go ahead. There is also significant rental demand both from tenants and property investors and the Council needs to assist here – a blog to follow.

In conclusion this is an exciting time for Dundee and an era that will I’m sure, mark the rebirth of the City.

PS – since writing this blog, the news has broken regarding the increased costs of the V&A.  I think this has been the worst kept secret as it has been clear for a number of months, if not longer, that the project was going to cost far more than budgeted.  Whilst it is now important that the powers that be keep the costs within the revised budget, the fact is that the V&A is fundamental to the future of Dundee and we should all work together to ensure it happens.

Lindsay Darroch
Partner & Head of Property
www.blackadders.co.uk

NEW YEAR’S RESOLUTION FOR THE PROPERTY MARKET

Following on the New Year’s theme I thought I would list, in no particular order, my hopes and requests for changes to the property market:-

1) The abolition of the Home Report in Scotland. Readers of my blogs will know that I am an avid campaigner against the Home Report in Scotland.  I find the recent Scottish Government 5 year review of the Home Report laughable.  Where is the evidence to show a reduction in the number of surveys being conducted due to the Home Report?  This does not reflect my own experience and given that the RCIS are now one of the biggest campaigners in favour of the Home Report leads me to draw my own conclusions.  Having been involved in a number of purchases, where as well as the Home Report, a refresh of the Home Report has been required and the lender has carried out their own survey, I cannot understand where this evidence has come from.  In my mind the biggest issue with the Home Report is still the conflict between the fact that it is the seller who is instructing the Home Report but it is the purchaser who is relying upon it.  I also have numerous complaints from clients regarding the poor information contained within the Home Report and a number of examples of Home Reports where the valuations are either far too high or far too low, both having negative consequences for the seller.  I would urge the Scottish Government to scrap this tax on sellers.

2) LBTT – whilst I welcome the changes to Stamp Duty, changing it from a Slab tax to a more progressive tax, I think the Scottish Government’s bandings are wrong. These will have a negative impact on the property market, in particular for the aspirational purchaser who is looking to buy at £350,000 to £400,000.  I would urge a rethink of this rate.

3) Mansion Tax – whilst I believe that there needs to be further mechanisms put in place to take the heat out of the property market, I think that the Mansion Tax is anti-aspirational and is a very large mallet to crack a small nut.

4) Leading on from point 3, I would urge the UK or Scottish Government, depending on devolution, to look at some form of amendments to Capital Gains Tax for houses.  I would propose that if someone sells their sole or main residence within 5 years of purchasing it then there is a sliding scale tax on any gain above a certain level. I think the funds raised should be used to create a housing fund to assist the housing market in times of economic downturns.  The rates on this can also be used, also in connection with the LBTT,  to take any assist the housing market should it start to overheat.

5) A formal fund set up to assist first time buyers. While there has been an increase in the number of first time buyers coming on to the market, I worry there is a potential generation in the UK that will never be able to get onto the housing ladder.  It is fundamental for the property market in particular and the economy as a whole that a free flow of first time buyers exists.

6) New-build Fund – I think there should also be a fund created to assist people purchasing new-build properties. As well as assisting people to move up the housing ladder and free up much needed stock, schemes like the Help to Buy have proved invaluable in assisting the construction industry get back on to its feet.  I think further support is still required.

My next blog will be about the City of Dundee.

Lindsay Darroch
Partner & Head of Property
www.blackadders.co.uk

PROPERTY PREDICTIONS 2015

Apologies for the delay in getting this blog to you – a sign of increasing activity in 2015?!  Before I give you my predictions for 2015, how did I get on with 2014?.

I predicted the start of an upturn in the property market with a 10% increase in activity levels and a small increase in the average house price.    I also said that the developers would require to take-up the strain and that there would be a requirement for Government to provide assistance to the property market, both new-build and first time buyers. I warned about the impacts of the Referendum and also drew your attention to certain changes including Stamp Duty.

So what was the actual outcome for 2014?  One of the things that has amazed me during the course of last year was the number of conflicting headlines and reports backed up by meaningful data showing either an overheating property market, a cooling down property market, an increase in first time buyers, a decrease in first time buyers and I think that reiterated to me the thoughts that I had had in the past in relation to the danger at looking at one headline or stat in isolation.  My feeling is that there has been an increase in activity in the Scottish property market at approximately the 10% level – this is in relation to the number of transactions.   There has been a slight increase in house prices, although properties in certain areas – in particular school catchment areas and where there is a shortage of properties – have shown big increases on recent years.  There is still a glut of first time buyer properties in the market.

The rush of properties coming on to the market in the first 3 months of 2014 that we predicted didn’t happen and we also had the MMR Review which had a big impact in relation to mortgage lending and the speed of lenders getting decisions and loan papers to clients.  I believe that the lenders were much more focused on controlling their lending and this was noticeable in relation to the peaks and troughs of mortgage availability.

The Referendum in September had a bigger impact on the residential market than we had anticipated, causing a massive slowdown from summer onwards.  Whilst there was a slight spike in October and November it was not quite as much as I would have anticipated given the previous quarter’s slow down.  We also had the announcement of the Scottish Government’s plans for Stamp Duty (LBTT) – see previous blogs and also comments to follow.  In relation to property investors  and developers there was a slight increase in the number of coming in to the market.  Whilst the developers showed very good figures they did not have enough stock to meet the demand.  Interestingly Taylor Wimpey have just announced their 2014 UK figures showing a 10% increase in activity and a 6% increase in house prices – very much following my own predictions.  We also had the publication of the Scottish Government’s 5 Year review into Home Reports – a document which I take great exception to and will write a blog shortly.

So what of 2015?  I believe that there will be an increased improvement in 2015 although my mantra is “cautiously optimistic”.  I would once again be predicting a 10% increase in market activity with a slight increase in house prices, probably averaging around the 5% mark.  I think lenders will continue to grow in confidence and that there will be an increase in property investors.  This will assist in relation to clearing some of the glut of first time buyer properties and also improving the quality of properties available to the increasing number of people who are looking to move property but cannot afford to buy so will need to rent.

There are some potential bumps on the road.  I would be concerned as to what effects a slowdown in the Eurozone has on the British Banks and in particular their appetite to support mortgage funding.  In April we have the launch of the Scottish Government’s Land and Business Transaction Tax, the replacement for SDLT, and whilst I welcome the progressive nature of this Tax I am very much of the view that they have got their bandings wrong and that their bandings will have a detrimental effect on the Scottish property market.  I am strongly campaigning for a rethink prior to the launch of this scheme.

In May we have the General Election and whilst I do not think that there will be the same uncertainty as there was in relation to the Referendum, I think there may be some economic uncertainty and I have a concern regarding the proposal for a Mansion Tax.  I am also concerned that the General Election will cause the Scottish and UK Governments to take their eye off the ball in relation to supporting the property market which, although it’s out of intensive care, still requires some therapy and I am hoping that there will be schemes to assist developers and first time buyers.  Again the figure to look out for is the number of properties coming on the market in the first 3 months of 2015

I wish all readers a belated happy new year and I will continue to keep you advised of trends in the property market.

Lindsay Darroch
Partner – Head of Property
www.blackadders.co.uk