Thousands of homeowners may be tempted to buy a better property in the next month to take advantage of record low mortgage rates and to avoid the Land and Buildings Transaction Tax, which will take effect on 1 April.
Estate agents have reported a buying bonanza north of the border in recent weeks. The house price index released by LSL Property Services earlier this week showed a 4.2 per cent rise in values over the past 12 months, with prices nearing their pre-recession peak.
But David Alexander, managing director of estate agent DJ Alexander, said vendors may have to cut prices to sell properties once "draconian" tax bands on properties worth more than £750,000 are activated.
He said: "House-hunters at the upper end of the market who manage to avoid LBTT are likely to end up worse off because most vendors will be forced, from 1 April, to drop their prices to make their properties more saleable.
"In all likelihood, it will make more sense to buy after 31 March for anyone seeking a property priced at £750,000 or more."
Buyers would incur an extra £18,350 on sales of properties worth between £750,000 and £1m under the new system. The tax owed on homes valued between £1m and £2m would rise by £38,000.
Mr Alexander said: "In Edinburgh and in some of Glasgow's wealthier suburbs, many people aspiring to own £1m homes are from modest backgrounds who have managed to climb the housing ladder through diligence and hard work and not as a result of inherited wealth. Just like everyone else, they have financial ceilings beyond which they are not prepared to go."
Alison Mitchell, mortgage adviser at Edinburgh-based Robson Macintosh, said it wasn't just "high fliers" who were uncertain about whether to beat the LBTT deadline, as anyone buying homes worth more than £333,000 would pay more than under the previous stamp duty system.
Ms Mitchell said: "Stamp duty above that price threshold is a very high expense and it will affect a good chunk of people living in Aberdeen, Edinburgh and other cities, many of whom are simply next time buyers.
"My opinion is that there will be a slowdown but that prices won't drop that much, which is why there is such a sense of urgency in the market right now."
Mr Swinney had previously set £255,000 as the minimum property value that would trigger a 10 per cent charge, but that level was recently changed to £325,000 after George Osborne announced his own reforms to stamp duty in England as part of the Autumn Statement. Those buying properties priced between £250,001 and £325,000 will now pay 5 per cent.
Ms Mitchell said she had advised one client who was purchasing a property worth £255,000 to wait until April to complete the transaction in order to save £750 in charges.
Gerry Weir, founder of Edinburgh-based Cornerstone Mortgages, said: "It is very hard to predict whether prices will fall and people don't want to take a chance. Properties are probably selling at higher prices than usual right now because clients are after a finite amount of properties and they would rather pay a premium for their home than give any extra money to the taxman."
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article