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Scottish property demand strong despite high tax burden

Demand for property in Scotland has remained steady despite the high taxes associated with buying property north of the border.

Scotland’s property tax intake was broadly flat in the past 12 months, totalling £623.1 million, according to analysis from property firm DJ Alexander.

Of that amount, £194.5m came from the additional dwelling supplement (ADS) of 6% which is charged on second homes and properties purchased by landlords and property investors to rent.

David Alexander, the chief executive officer of DJ Alexander Scotland, raised frustrations that “we are charged substantially more than our English counterparts”.

He said: “Demand remains strong in Scotland despite the higher taxes. Whether demand would be even greater if there was a level playing field in property tax we will not know unless the new First Minister decides to make the system fairer for those buying in Scotland.”

“Perhaps even more extraordinary is the high level of additional dwelling supplement (ADS) being paid indicating the resilience of investors and landlords buying into the private rental sector.

“While this 6% additional tax is also charged on second homes the number of those has been plummeting in recent years, so property investment is the most likely source of these purchases.”

Properties costing between £325,001 and £750,000 in Scotland incur a 10% Land and Buildings Transaction Tax rate.

Alexander added: “The truth is that “LBTT, like Stamp Duty Land Tax (SDLT) in England, is an easy earner for governments. Buying a house is a visible transaction so buyers simply have to pay up or move to somewhere where the purchase costs are not quite as punitive.

“While the Scottish market continues to perform strongly this may not continue if taxes remain substantially higher in Scotland than the rest of the UK.

“It may deter individuals and companies from future investments in Scotland if the higher costs in property and personal taxes results in people being unwilling to move here while the taxation regime is so much higher than elsewhere in the UK.

“Until that point though this remains a substantial revenue earner for the Scottish government.”