How could the Scottish budget affect the property market?
Key Takeaways
- Properties over £1 million face new council tax bands in 2028, prompting valuation concerns and highlighting the outdated 1991 system.
- Cladding removal funding rises to £115 million, supporting homeowners, but progress remains slow nearly a decade after Grenfell.
- £4.1 billion is allocated for affordable homes, yet funding still falls short of the £1.64 billion annual requirement.
- No changes to LBTT or ADS, despite calls for zonal thresholds and temporary ADS suspension to support buyers and rental supply.
- No new first-time buyer reliefs announced, and Heat in Buildings Bill remains unclear, leaving homeowners uncertain about future decarbonisation obligations.
In this episode of the ESPC Property Show podcast, Paul & Megan sit down to dissect the latest Scottish Budget announcement and how it could affect the local property market. They touch on a lack of action on LBTT and first-time buyer relief, the proposed "mansion tax" and the increase to the Cladding Remediation fund. Plus, find out what is on the ESPC manifesto ahead of the upcoming Scottish election.
Watch the episode here↓
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Key Insights
"Mansion Tax" (Council Tax Revaluation for High-Value Homes)
Properties worth over £1 million will be placed into newly created council tax bands as part of a wider revaluation planned for 2028, raising questions about how such valuations will be carried out and whether fixed thresholds will capture more homes over time as prices rise. The speakers argue that a full overhaul of the council tax system - still based on 1991 valuations - is overdue, and note that with only 391 sales over £1 million in 2024–25 (over half in Edinburgh), the immediate impact will be narrow and regionally concentrated.
Cladding remediation funding
Funding for removing unsafe cladding has risen from £60 million to £115 million, offering crucial support to homeowners - particularly where original developers no longer exist - though the speakers emphasise that progress remains extremely slow given it is nearly a decade since the Grenfell tragedy, and further acceleration is essential.
Affordable housing budget
The budget allocates £4.1 billion for building new affordable homes, a move welcomed by the sector, although organisations such as the Scottish Federation of Housing Associations and Shelter argue it is insufficient compared with the estimated £1.64 billion per year required; overall, the discussion underscores the pressing need to boost housing supply across all tenures.
Land and Buildings Transaction Tax (LBTT)
No LBTT changes were announced, despite ESPC’s call for a zonal approach that adjusts the £175,000 zero-threshold to reflect regional price variations - such as increasing it to £250,000 in Edinburgh - to create fairer outcomes for buyers, with an ongoing review expected to inform any future reforms.
Additional Dwelling Supplement (ADS)
The budget left the 8% ADS unchanged, even though ESPC advocates temporarily suspending the tax to encourage more landlords back into the market, increase rental supply, ease pressure on rents, and help prospective first-time buyers save more effectively for deposits.
First-time buyer relief
Despite government commitments to support young people into homeownership, no new first-time buyer reliefs were introduced, prompting ESPC to highlight the popularity and rapid uptake of earlier schemes such as Help to Buy and to call for renewed assistance in this area.
Heat in Buildings Bill
The budget offered no further clarity on the paused Heat in Buildings Bill, which aims to decarbonise housing through measures such as phasing out gas boilers and raising energy-efficiency standards; the speakers argue that clearer direction is urgently needed given the bill’s long-term implications for homeowners and the wider property market.