Homes shortage 'pushing up property prices' in Edinburgh and Glasgow

A shortage of homes for sale in Scotland continues to push house prices upwards, according to the Royal Institution of Chartered Surveyors.

RICS also reports that the controversial Land and Buildings Transaction Tax (LBTT) is still having a negative impact on instructions to sell in the middle-to-prime home brackets and is also harming lower price brackets too.

A net balance of +21% of Scottish surveyors in the latest RICS survey state that house prices rose in January, which was above the UK figure of +8%.

This comes as  a net balance of -12% report a fall in the number of homes becoming available for sale.

It is the 10th consecutive month that the data for new instructions to sell has been in negative territory.

With new buyer inquiries continuing to increase, RICS said this suggests that there is a widening gap between availability and demand.

Upbeat

But Scottish surveyors remain relatively upbeat about the three-month outlook for the market. 

A net balance of +32% expect sales activity to increase in the February-April period and a net balance of +7% anticipate price will rise in those months.

Gail Hunter, RICS director in Scotland, said: "Surveyors remain positive about the prospects for the housing market in Scotland. 

"However, they also point to a shortage of properties becoming available for sale, which will have a constraining effect on sales activity and potentially push up prices further."

She added that, anecdotally, surveyors continue to report that LBTT is having an ongoing negative impact on instructions to sell in the middle-to-prime brackets of the market, and this is having a detrimental trickle-down effect in other house price brackets.

Call for reform

There have been frequent calls on the Scottish Government to overhaul LBTT,  which replaced the old stamp duty system in 2015 but has consistently failed to raise as much revenue as expected amid claims the measure was poorly designed.

RICS said last summer it wanted Finance Secretary Derek Mackay to urgently review the policy as it had caused a property bottleneck.

However, the Scottish Government announced in December that the residential and non-residential rates and bands for LBTT will remain unchanged, apart from a move for first-time homebuyers in Scotland not to pay the tax on properties costing up to £175,000.

Alan Cumming, national estate agency director at Aberdein Considine, said then it was disappointing that Mr Mackay had chosen not to examine the middle and upper bands of LBTT, which had caused fundamental market interference in Scotland, particularly in the £500,000-plus price bracket where significant sums of the tax become due. 

"Due to the bottleneck being created at the top end of the market, the current structure is expected to raise tens of millions less than forecast over the life of the current parliament. This was a missed chance for Mr Mackay to address that," he added.

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