27 Mar 2014

A look at the Budget 2014 and the implications for the Scottish Property Market

A look at the Budget 2014 and the implications for the Scottish Property Market

Claire Ogston, Senior Solicitor, discusses the government’s recent Budget, delivered by Chancellor George Osborne on the 19th March 2014, and the impact it will have on the property market.

Claire Ogston, Senior Solicitor, discusses the government’s recent Budget, delivered by Chancellor George Osborne on the 19th March 2014, and the impact it will have on the property market.

George Osborne has confirmed in the recent Budget that the UK Government will be extending the first part of the Help to Buy Scheme (also referred to as “Help to Buy 1”) until 2020. The scheme provides equity loans to purchasers buying new build properties requiring only a 5% deposit.  Originally due to expire in 2016, the Chancellor has extended the Scheme  by an extra four years in the hope it will allow more people to get on to the property ladder and boost the UK construction industry.

Noticeably, there has been no extension of the “Help to Buy 2” scheme, which enables home buyers to obtain a 95% mortgage on either a newly built home or an existing property up to the value of £600,000. This scheme is scheduled to finish at the end of 2016.

Both Help to Buy Schemes have proven extremely popular in recent months, particularly for First Time Buyers, who in the current improving property market, often struggle to take their first step on to the property ladder.

Other than the extension to the Help to Buy Scheme there is very little of significance in relation to property in Scotland in the budget. Perhaps most surprising is the Chancellor’s failure to introduce any form of Stamp Duty reform. It had been predicted that the UK Government might introduce a ’Stamp Duty Credits Scheme’ allowing sellers to deduct the value of stamp duty paid by their buyer from the amount they pay on their next home.

Also anticipated was an increase in the current threshold of £125,000, at which level, purchasers currently pay 1% of the purchase price up to a value of £250,000.

Neither of these measures has been introduced. Indeed, the only reform relating to Stamp Duty has arrived in the form of an introduction of a 15% tax on residential properties worth over £500,000 that are purchased through companies. Previously this tax only applied to properties worth in excess of £2million. The purpose of this change appears to be to combat Stamp Duty avoidance and is likely to strike overseas investors.

Given recent market conditions and the overall increase in the average property price, the UK Government’s decision not  to reform the current Stamp Duty thresholds is disappointing. An increased threshold would have been welcomed by most, and in particular First Time Buyers, who currently struggle to compete with ‘next time buyers’ and buy-to-let investors.

 

Also, in certain areas of Scotland(particularly Aberdeen , Aberdeenshire and parts of Edinburgh and Glasgow) it is now the case that very few properties are valued below the initial £125,000 threshold.

 

Claire Ogston, Solicitor


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