How Nicola Sturgeon’s tax raid wrecked Scotland’s rental market

Landlords have abandoned the Scottish buy- to- let market following Nicola Sturgeon’s tax crackdown, creating a shortage of homes for students and families in the country.

Investment in new rental properties with multiple bedrooms “disappeared overnight” after the Scottish Government increased the tax paid when purchasing second homes from 4pc to 6pc in December, estate agents have said.

The tax rise was the latest crackdown on landlords in the country, who have also shouldered a temporary eviction ban and rent freeze on existing properties in the past four months.

Miles Gilham, of Glenham Property in Edinburgh, said: “Since the tax rise was announced we have seen a lot of investors abandoning property searches, especially for higher- end property on which they will be taxed more. This will be a particular problem for ‘houses in multiple occupation’, which have a higher price.”

A HMO in a decent area of Edinburgh costs at least £300,000, he added. An investor purchasing a property for £325,000 would pay tax of £25,349 – made up of £5,850 in land and buildings transaction tax and £19,499 owed in additional dwelling supplement.

Mr Gilham warned fewer landlords investing in the buy-to-let market had exacerbated a dire shortage of homes available to rent. One property for let in Edinburgh at the end of last year had 318 hopeful renters competing for it.

Mr Gilham added: “Investor demand for HMOs stopped overnight following the tax rise. In Glasgow there are students still sofa surfing in January, four months after term started, because they can’t find accommodation. It will also affect families looking for accommodation with several bedrooms.”

An exodus from the Scottish buyto-let market was already under way before December’s tax rise. A six-month rent freeze and eviction ban introduced by Ms Sturgeon in September has spooked landlords, who fear rent controls could be extended or made permanent.

A survey by trade body Propertymark found that 90pc of Scottish agents said landlords are planning to leave the sector because of the temporary policies. Almost 70pc of agents reported an increase in landlords serving notice to tenants so they could sell up.

Timothy Douglas, of Propertymark, said: “The tax rise makes Scotland one of the most expensive areas for buyto-let investment in the UK. Coupled with the emergency legislation, landlords are either leaving or raising rents on new lets to claw back some of the extra costs.

“Alarmingly, the temporary nature of the legislation means that the impact is not fully realised yet.”

Rents on newly let properties in Scotland, which are exempt from the ban, surged by 11pc in the year to December, the fastest pace in the UK, according to estate agency Hamptons. Nationally, monthly rents rose by 7.7pc in the same period.