Chamber and committees

It is probably not true to say that it is an unregulated market; it is quite a well-regulated market, but obviously there are policy changes, some aspects of which are around the scope and extent of the regulation. However, as I said, that is outside the scope of this discussion, which is on ADS.

With regard to the impact, as its name says, ADS is designed for additional dwellings, so it covers second homes and properties that are let out. In terms of both of those, making more homes available for buyers who are owner-occupiers is the direction of travel that we are keen to see, to give more of an advantage to first-time and other buyers in the market.

That was quite a roundabout argument. There are lots of things that would impact people’s ability to have the funds to put down a deposit; rent is only one part of that. Other aspects are the cost of living, the measures that we are taking to support first-time buyers, and the increase in ADS, which I think will help to shift the balance in the market in favour of first-time buyers and others who are buying a property in order to live in it.

The argument that you are making is that the landlord is charged the additional ADS, which is then charged to the tenant, who would be unable to pay a deposit as a consequence. I think that the impact of the additional ADS would be diluted in that process and I suggest that there are other things that are probably more significant for the tenant’s ability to compete in the market, if they choose to do so. There is a lot of data on that across the piece, which you could look at, which could help to make that argument.

We have just completed an ADS review that pulled up some specific items, or wrinkles, as you might want to call them, in the system, which we are addressing. An LBTT review is coming up shortly.

Those properties are not going anywhere. If they are not bought by an investor to let, they will be bought by someone who will live in them. If those properties are being bought by someone who is going to live in them, we would not necessarily see that as a negative consequence. The issue of build to rent and investment coming in to add new capacity to the system, which is hugely important, is a separate issue, but it is outside the scope of ADS, because it does not apply to large numbers of properties.

As I have said, investment in new builds and large purchases are outside the scope of the policy. There has been a slight increase in the number of registered properties, and the number of individual landlords is broadly flat, so the policy is not having a detrimental impact on the sector in the way that some may posit.

I have pages and pages of data in front of me. We know the number of transactions. We know what is happening with revenue, we know how that plays out against the forecast that the SFC put together for the previous increase, and, indeed, for this increase, we know what the tax elasticities are in the assumptions that it has made. We know what the numbers of registered landlords and registered properties are, we know what the revenue forecasts are and we know how the reduction in ADS transactions compares with the shift in the overall number of LBTT transactions. We have a lot of data, and the data suggests that that is not having the detrimental impact on the market that some might suggest.

If there is any more data that the member thinks that we should be looking at, I would be interested to hear what that would be.

Indeed.

I do not think that we can express it in those terms. First of all, as I indicated, the data shows that the numbers of registered landlords and registered properties are staying flat—indeed, there has been a slight increase in the number of properties in the recent period. That suggests that the anecdotal evidence that landlords are leaving the market is just that—it is anecdotal. At this stage, the data absolutely does not support it. As I said, we have seen a reduction in the number of second homes over a period of time, and I think that that trend predates the increases in ADS. Clearly, the policy is moving in the right direction.

As you rightly say, the amount of revenue raised in the most recent period has been in excess of the SFC forecast, taking into account the behavioural changes that it has factored in, so that policy objective is being delivered. It is self-evidently true that the measure puts buyers who do not have to pay ADS in an advantageous position over buy-to-let landlords, which is clearly the policy intent.

That is an interesting point and I can see the member’s line of thinking. I am not aware that that specific analysis has been done, but I will undertake to look at that scenario to see whether we can furnish the member with data.

It is an on-going process and will help to inform the broader LBTT picture. At each point in the budget cycle for the annual budget, we make decisions about what tax rates should be. At this point, I think that making the change in ADS rates is the right decision.