Is 'Progressive' Fairer?

The Scottish Parliament will have new financial powers, from 2015, over taxes on land and property transactions and on disposal to landfill.  The new powers come courtesy of the Scotland Act 2012.

This week John Swinney unveiled his plans to scrap Stamp Duty land tax to the Parliament and announced a consultation on the Land and Buildings Transaction Tax, which will replace Stamp Duty.

Initially, when I read about this new tax being 'progressive', I immediately assumed it would be a licence to force more money out of people's pockets, but I hope to be proved wrong. (Green energy taxes were described as progressive when they were first mooted).

John Swinney's description of the new tax may appear to be fairer than the current system, although there is little detail. He proposes to decrease tax on properties under £325,000 (or thereabouts) and suggests that would bring benefits to around 95% of the property market. Those looking to buy a home worth £180,000 or less would be exempt from paying tax altogether - a move to encourage first-time buyers.

However these proposals will not make house purchasing less expensive. Anyone purchasing a property in Scotland has to provide a Home Report which can cost several hundred pounds. Since the introduction of these reports I have yet to meet anyone who has purchased a house solely using the content and they have -sensibly - also acquired their own independent survey; thereby pushing purchase costs higher.

The new tax may well curb the regular increase in house prices, although some may think that's a good thing, but that is not necessarily so. If fewer people buy pricier properties, because the tax will be higher than elsewhere in the UK, then they may well fall into disrepair.

In general Scotland's house prices have always been lower than many south of the border and in recent years, that has attracted those who have sold property in these areas to buy here.  The new tax will make no difference to situations where locals are unable to afford to buy because bidding wars push properties outwith their budgets.

Another consideration should be given to the exemption on properties under £180,000.  Will this encourage more developers (purchasing on a buy-to-let basis) rather than first-time buyers?

I do hope a revision of the banding system is included in the consultation, but that was not mentioned in John Swinney's statement.

The devil will be in the detail no doubt, but until we get rid of the mandatory Home Report - which England did some time ago - house buying in Scotland will continue to be more expensive than the English system.

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Selling Up? You'll Need A Home Report

At this time of year there's usually a drop in the house sales market because people are more interested in their annual holiday than thinking of moving house.  However, I've noticed quite a few homes have appeared on the market in the last couple of months.

During a conversation with my friendly solicitor - who doubles as an estate agent - I mentioned the surprising number of larger homes which have suddenly appeared and was told the majority were people wishing to 'downsize' because maintaining the family home with just one or two occupants was no longer financially viable.  The ever increasing utility costs also played a major role in the decision.

Selling a much loved home isn't an easy decision and emotions can run high.

In Scotland a seller has to provide a Home Report which involves a single survey of the property, an energy report and a property questionnaire.  The report costs between £500 and £700 depending on the size of the property and the documents in the report must be no more than 12 weeks old when the property is put on the market.

Last year a neighbour decided to sell her property and move to a flat.  She organised the Home Report, but unfortunately fell an broke her hip a week before she intended to market her house.  Because her recovery was slow it was nearly six months before she felt fit enough to handle selling and looking around for another flat (the one she originally intended to buy had been sold as the vendor wasn't prepared to wait).

So she instructed her solicitor to begin the marketing process, only to be told she would require a new Home Report as the 'old' one was out of date.  This cost her a further £300 and she insists it was an exact copy of the old one with only the dates changed. No surveyor revisited the property to do a reassessment thereby verifying it was purely a paper exercise.  Her Home Reports cost nearly £1,000 - money which can't be reclaimed directly.

Many older people are 'asset rich' and finding a four-figure sum which has to be paid upfront is not always easy.

While the idea of a Home Report seems reasonable - although it's recommended buyers have their own survey undertaken - the 12 week limit is too restricting. If you decide to take your property temporarily off the market, the maximum time allowed is 4 weeks. If it's longer then a new report is required.

Wouldn't a 26 week limit be more reasonable or are the Scottish government happy for estate agents to be making extortionate sums for photocopying original documents?  I suggest the government should put a fixed fee of say £50 on duplicate reports and stop this rip-off, because that's what it is.

Last year the Westminster coalition scrapped home information packs in England and Wales.  The Tory MSP David McLetchie said it was time for the Scottish government to do so too.  Considering these reports are not accepted some lenders and also buyers are advised to have their own survey done, the only beneficiaries are the producers.

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Home Reports

Do you know anyone who has bought or sold a house recently?  I have a friend who put her house on the market a few weeks ago and had to pay for a home report which is now a legal requirement when selling a house and comprises of three elements - the survey, the energy performance certificate and the property questionnaire.

She has a couple who are exceptionally keen to buy her house and the sale seems to be going ahead smoothly but she wasn't comfortable with the new report as she felt too much responsibility lay with her instead of the buyers, but she admits the exercise was interesting. Until now of course, it has been the buyer who has to ensure the property they are purchasing is worth their hard earned money.

Lots of other queries popped up too.  How long do you think the value on a report is valid? There is a suggestion that three months is reasonable but is it in today's market? Are surveyors going to provide you with a new report or update without payment and wait until you have sold your property?  The energy performance certificate lasts 5 years.  Make any changes and you will need a new one.

Does the property questionnaire tell the whole truth and nothing but the truth?  That may be debatable as the information it provides may be correct but lacking in substance and a purchaser may still be left to discover potentially expensive shocks.  There is lots of other information you may be required to provide as a seller and this may have a cost in some instances.

It is suggested by a property specialist in today's Scotsman that home reports may be hindering recovery in the housing market and should be dropped for the time being.  He suggests the provision of all the information is not necessarily beneficial. I would disagree.  The more information you have about a property the better.  After all it's your money and a house is usually the biggest investment any of us make in our lifetimes.

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