Property experts have called for a review of Scotland's stamp duty replacement as new analysis shows it could face a shortfall of more than £30 million in its first year.
The Scottish Property Federation (SPF) said evidence showed the higher end of the market was stalling as a result of the new land and buildings transaction tax (LBTT).
A new paper submitted by the Scottish Fiscal Commission to Holyrood's Finance Committee estimates revenues under the new tax of between £203.9 million to £243.9 million, once the effect of forestalling - people bringing transactions forward to avoid the new tax - is taken into account.
That compares to the Scottish Government's forecast for LBTT revenues of £235 million for the year 2015-16, which did not include forestalling.
Under LBTT a rate of 5% is levied on the proportion of a property's price between £250,000 and £325,000, with a 10% rate applying between £325,000 and £750,000 and 12% above £750,000.
SPF wants the 5% rate threshold to be raised to £500,000 and the 12% rate to be abolished.
Chairman Chris Stewart said the federation's figures showed a 22.5% decline in sales of properties over £400,000 between May to September 2014 and the same period in 2015, with a 54% reduction in sales of homes costing more than £1 million.
Sales to international buyers in the highest bracket were also down from 27% last year to 18% in 2015.
Mr Stewart told Holyrood's Finance Committee: "This is not about feeling sorry for people in that part of the market, it's about allowing the market to function properly.
"Clearly the tax structure, that 12%, is putting people off .... it's stopping people from investing in Scotland."
Similar concerns were raised by Philip Hogg, chief executive of Homes for Scotland, which represents the home building industry.
He said: "The impact of the tax at the top tier levels, the ones where the higher tax bands come in, has been quite significant and we're hearing anecdotally a number of our members stating that sales have either been stalled or have not gone through."
Mr Hogg pointed to evidence that buyers at the top end of the market were opting to "spruce up" their homes instead of moving.
Homes for Scotland is not calling for immediate change to the regime but wants it kept under "close review" with a view to adjusting or tweaking the system if current trends continue.
Kennedy Foster, policy consultant at the Council of Mortgage Lenders, pointed to growth in the mortgage lending market in Scotland, particularly for first-time buyers, but cautioned this could be due to other factors such as low interest rates and a competitive mortgage market.
He said figures for the quarter ending September show first-time buyer numbers up to 8,500 with the value of loans granted for house purchase at £920 million.
Professor Campbell Leith, from the Scottish Fiscal Commission, told MSPs: "The out-turn data is significantly below what you would expect given the seasonality you would normally expect in the data.
"This may be because of a temporary forestalling effect or it may be that the change in the tax regime has permanently subdued certain parts of the market and this will continue indefinitely."
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 hereLast Updated:
Report this comment Cancel