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Scottish investors are remaining cautious about their investment portfolios according to new research from Aberdin Considine.
Aberdin Considine found that two-thirds of homeowners have been deterred from investing in a second home due to the additional 3 per cent stamp duty surcharge introduced by the Scottish Government two years ago. The phasing out of mortgage interest tax relief also had a dampening effect, and sales were down across more than half of the country.
The latest phase of the government crackdown on buy to the let sector came into effect last month. Landlords are now only able to offset 50 per cent of their mortgage expenses against their tax bill in the existing tax year. This has led to a difficult period for some landlords. Increasingly stringent lending conditions have also deterred some from the sector.
Aside from the tax changes, landlords are also affected by The Private Housing (Tenancies) (Scotland) Act 2016, which has introduced the Scottish Private Residential Tenancy, the new form of private tenancy for Scotland. Tenancies will now have no minimum period and will continue indefinitely unless the tenant chooses to leave or the landlord terminates the tenancy using a prescribed ground for eviction.
However, national lettings director at Aberdein Considine, Adrian Sangster, is of the opinion that the buy to let market offers opportunities for Scottish investors willing to ‘ride out the storm’. He said: ‘The additional tax, together with the staged withdrawal of relief on mortgage payments by the UK government, is undoubtedly having a detrimental impact on the Scottish property market. By targeting landlords, politicians north and south of the border are squeezing one of the biggest and most powerful buying forces out of the Scottish property market, which is already affecting sales in certain areas.’
He added: ‘However, this is only going to end one way – with rents increasing due to fewer good quality private lets being available. Landlords who can adapt to this new climate for the private rental sector stand to reap huge benefits in the medium to long-term.’