26th April 2016

THE ADDITIONAL DWELLING SUPPLEMENT

As promised, I thought that I would give you my further thoughts in relation to the Additional Dwelling Supplement.  As readers of my blogs know, I am against this supplement as I feel 1) it will cause a manipulation of the market, 2) there will be unintended consequences and 3) it will put a brake on property investors buying certain properties which will have a blocking effect on the housing market, rather than the freeing up that was intended.  I will answer these points in order:-

Manipulation of the Market – I can confirm from personal experience, and also from speaking to other property lawyers, that there was a massive increase in the number of property investors purchasing investment properties in February and March of this year, prior to the introduction of the surcharge.  In my own local area of Dundee and Angus there was a 45% increase in the number of flats sold in March.  I have also been acting for a number of clients across Scotland and had to deal with rapidly increasing prices and competitive situations.

Unintended Consequences – Clients may want to assist a child in buying a property and the only option may be to incorporate themselves onto the Title – this will now carry an extra 3% charge. Similarly, a separating couple where the person leaving the matrimonial home needs to buy another property will now incur the 3% charge. The unfairness of the system seems very clear to me.

Blocking of the Housing Market – The surcharge was intended to price property investors out of the market to make it easier for first time buyers but in my experience, investors are generally not purchasing the types of properties that would be of interest to first time buyers. All that’s happened is there’s now a swathe of sellers who no longer have the property investors looking at their property or if they do, the investor has factored in the 3% charge. This is perhaps not true in all cases as there will be some instances where it will be easier for first time buyers to step on the ladder because they are not competing with property investors, but I would suggest that this will be by far the minority of cases.  A drying up of the supply of rented properties will increase rents meaning it will be harder for people to save the requisite deposit to allow them on the property ladder. I would hope that the Government would use some of the 3% surcharge to fund a scheme to assist first time buyers gain access to 95% loan to value mortgages, thus minimising their deposit to 5%.

I was also very interested to read an article by Phillip Aldrick in The Times on Saturday 23rd April.  The article was based on the introduction of a Land Bank Tax – a stick to encourage developers to begin developing properties to feed into the market.  This would have the benefit of alleviating the shortage of houses throughout the UK and would also help control prices, which continue to soar due to lack of supply.  I would agree with this policy. He concluded:-

“Taxes are not just about revenues, they can be used to change behaviour.  Get a Land Bank policy right and it might not raise a penny but it could turn Britain’s dream of more houses into reality”.

In conclusion, I would urge the Government to rethink the Additional Dwelling Surcharge, introduce a Land Bank Tax and also change the Capital Gains Tax policies in relation to properties, using the extra funds raised to create a first time buyer fund.

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

 

 

The opinions expressed in this site are of the author(s) only and do not necessarily represent the opinions of Blackadders LLP.

Blackadders takes all reasonable steps to ensure that the content of this site is accurate and up to date. The site is not, however, intended as a substitute for seeking legal or other professional advice but rather as an informative guide to the services provided by Blackadders and topical legal developments. Site visitors should always seek advice tailored to their specific situation. Consequently, Blackadders accepts no responsibility for any loss or damage suffered by anyone acting or failing to act on the basis of information contained on this site. Downloading of material contained on this site is at the user’s own risk and all necessary virus checks must first be carried out by the user. Blackadders is not responsible for the material found on any web sites linked to this one and links to this site may only be made with Blackadders prior consent.

Copyright

Blackadders owns the copyright in this blog and all material contained on it. The material on this site may be downloaded for personal use only and must not be altered. Otherwise, Blackadders’ written consent is required before any material on this site is reproduced, copied or transmitted in any way.

Privacy Statement

Information passed to us via this site is kept confidential and will not be disclosed to third parties except if authorised by you or required by law.

© Blackadders LLP 2011

Members of the Law Society of Scotland. Authorised to conduct Investment Business under the Financial Services & Markets Act 2000 by the Financial Services Authority.

Blackadders Solicitors is a trading name of Blackadders LLP, a limited liability partnership, registered in Scotland No SO301600 whose registered office is 30 & 34 Reform Street, Dundee, DD1 1RJ. Reference to a ‘partner’ is to a member of Blackadders LLP.

Back to News & Legal Updates