The CEO of agency DJ Alexander has slammed the Scottish government’s decision to raise the Additional Dwelling Supplement (ADS) from 4% to 6%.

The move to increase the levy paid on additional properties as part of the Land and Buildings Transaction Tax (LBTT)  was announced by second first minister John Swinney in the Scottish budget last Thursday. It followed a call by DJ Alexander CEO David Alexander for the Scottish government to offer a lifeline to homeowners north of the border – a plea which the agency boss believes was ignored.

“It probably won’t surprise anyone that John Swinney failed to support the housing market in Scotland in his budget speech,” he said. “He had an opportunity to equalise Scottish property taxes with England in his budget but instead decided to maintain a widening disparity which can only have the effect of making houses considerably more expensive for first-time buyers, those buying for more than £325,001, and those seeking to invest in property or to buy a second home.

“Indeed, the additional dwelling supplement is to be increased from 4% to 6% to act as a further disincentive to landlords, property investors and second homeowners. In October £19.3m was raised through the ADS, which was a quarter (27.7%) of all revenue raised. The policy of targeting the private rented sector continues, yet there is no evidence that the Scottish government has any plan in place on how to replace the 340,000 properties and the 700,000 tenants who live in these homes.”

Alexander said the additional charges imposed when buying a home in Scotland will have a substantially greater dampening effect on the Scottish housing market than in England, where he believes the reduced stamp duty rate will encourage a lower fall in prices and spur a more rapid recovery.

“Over the last year alone, 700 people earning more than £150,000 – around 3.5% of the total – have left the country, so their substantial contributions will be missing from government funds in the future,” he added. “If these policies persist, then we may see a smaller and smaller number of people willing to pay the highest taxes and the largest tax on property purchases in the UK.”

Industry body Propertymark also warned of a detrimental effect on the Scottish market following the ADS hike. Timothy Douglas, head of policy and campaigns, commented: “Our Propertymark members in Scotland already tell us of the plummeting desire for landlords to remain in the sector, with 68% of letting agents reporting an increase in notices to sell due to ongoing legislative changes. Therefore, it is disappointing to see the blatant disregard for the importance of incentivising investment in the private rented sector by raising the Additional Dwelling Supplement from 4% to 6% for additional homes.

“The private rented sector is a key solution to resolve the housing crisis but if the Scottish government continues with policies that disincentive landlords, this will only make the situation worse,” Douglas added.