Key facts for Q4 2014:
- Prices rose by 1% during the fourth quarter of 2014
- Prices rose 2.1% in 2014 compared to 1.6% in 2013
- Under the proposed new stamp duty rates the tax payable for a buyer of a £900,000 property will increase by 92%
An increase in demand for prime property between September and December ensured a strong end to 2014, both in terms of prices and transactions. Oliver Knight examines the figures.
Prime Scottish country house values rose by 1% in the final quarter of 2014 following two quarters of no change. Prices ended the year up 2.1%, after a 1.6% change in 2013.
The rise in prices seen in Q4 came amid a notable step up in buyer demand. This can be attributed to two key factors. Firstly, the market responded to the certainty provided by the result of the Referendum. After months of uncertainty, buyers have felt more secure about making a decision to move house or purchase a property.
Secondly, the announcement of the proposed Land and Building Transaction Tax (LBTT) rates in October. The higher upfront cost of moving when LBTT comes into force in April 2015, especially in the prime market, has prompted some homebuyers and vendors to make quick decisions.
Under the rates proposed in the incoming LBTT system any sales above £254,000 will incur a higher rate of tax compared with the current stamp duty structure, introduced earlier this month at the Autumn Statement by George Osborne. For properties in the prime market, the cost will be significantly higher.
The number of potential buyers registering their interest in purchasing a property with Knight Frank was 18% higher in Q4 than the same period a year ago, with a similar rise in viewings. Sales were over 50% higher during the same period.
We expect this trend will continue into the New Year, driven by a desire among vendors and homebuyers to move before the introduction of the new LBTT levy in four months’ time.
Under the current system, a house costing £900,000 will incur a stamp duty payment of £35,000, whereas the upfront costs under the new LBTT system for the same property will be 92% higher at £67,300.
As a result of the stamp duty reforms announced during the Autumn Statement, by the time LBTT is introduced, homebuyers in Scotland will have had to adjust to three different tax systems within six months.
Ran Morgan, Head of Scotland Residential, said:
“The announcement of the proposed Land and Buildings Transaction Tax rates in October has already encouraged vendors and homebuyers in the prime market to make quick decisions to avoid the increased tax burden.”
“We expect this will continue and as a result are anticipating a busy start to 2015.”
“In the estates market, details of Land Reform proposals and CAP reform continue to emerge. Until these are finalised we expect the activity to remain subdued.”