6. Will the Minister make a statement on the impact of the land transaction tax? OQ56810

Since April 2018, land transaction tax has raised over £800 million. The funds raised have been used to fund our valued public services, including investment in social housing.

Thank you much for that response. Last year, your Government raised the higher rate of the land transaction tax by 1 per cent in order to try and tackle the second homes crisis. At that point, up to 44 per cent of the homes sold in my constituency of Dwyfor Meirionydd were second homes. We in Plaid Cymru warned at that point that that 1 per cent was far from being sufficient and that it would have no impact at all on the housing market. This year again, we have seen that up to 44 per cent of the homes sold in Dwyfor Meirionydd are second homes. Indeed, in your own constituency of Gower, it increased from 24 per cent to 29 per cent. Now, it is time that we saw far more effective changes. Isn't it time for you to consider at least trebling the land transaction tax in order to make a real difference and to devolve that funding to our local authorities so that they can use the funds to build social housing and affordable housing in our communities?

Well, funding from land transaction tax already supports local authorities and others in terms of supporting our agenda for building more social homes. But I do have to say there are a couple of things that I do need to put on record. So, the additional rate at the moment stands 4 percentage points on top of the main rates for land transaction tax. So, the most recent announcement was an additional, permanent 1 per cent on top of the 3 per cent.

I also think it's important that we portray the figures in terms of house sales and transactions correctly. So, it's not always possible to tell whether properties that are subject to the higher rates were already in one of those categories to which higher rates already applied before the transaction. So, therefore, the transaction may not change the nature of the ownership of the property. For example, a transaction may be from one private holiday home owner to another private holiday home owner, but it also might be from a buy-to-let landlord who's providing a rental property for a local member of the community to another buy-to-let landlord. So, I do think it's important to reflect the figures correctly. They're not all second homes; it's impossible to say that.

It's also important that the figures relate not to the entire stock of the area as well, only to those properties that have been sold. That's not to diminish the fact that I understand that second home purchases are a significant problem and issue in many communities, but I do think it's important that when we are reflecting on the figures we do so in a way that shows the wider picture.

Speaking here in February, I stated that

'the Welsh Government's increased land transaction tax higher rates, which hit large numbers of legitimate small and medium-sized businesses, many of them with properties near the internal UK border with England, are higher than equivalent stamp duty land tax higher rates in England for purchase prices up to just £125,000, and higher for all purchase prices in England above just £180,000...even after the higher rates holiday introduced by the UK Government in response to the COVID pandemic comes to an end'.

Further, higher rates of land transaction tax are levied on the purchase of properties to rent, as well as second homes. How do you therefore respond to the constituent who e-mailed last week, 'I have a small holiday let business, and the house next door to me came on the market, being sold through a local estate agent. I wish to renovate it and use it as a holiday let, not a second home. I've found that it is subject to a large amount of land transaction stamp duty. The house is not habitable and I'm trying to encourage people to visit Wales and bolster the economy'?

I think that the situation that Mark Isherwood has described does show that there are many factors at play here in terms of people's motivations to buy properties. We've taken the deliberate decision to try and increase the higher rate of land transaction tax, because we're very interested in supporting individuals in communities to be able to buy their home to live in. That's our primary concern in that regard, although we do understand the importance of tourism to many communities in Wales. It's a very difficult balance, but we're very keen to ensure that people are able to find affordable housing to live in in their own communities. Part of that's about using tax. I think that it's possible, sometimes, to overestimate the impact that land transaction tax will have on behaviour; it's fundamentally a revenue-raising tax, of course. But there are several items at play here. It's important that we consider planning. It's important that we consider how much more we can invest in social housing. It's important that we consider how we can work with residential landlords and others to leverage investment into this particular agenda. So, there are many, many aspects here. It's partly about supply of housing, partly about planning, but it's also about how we use the other tools at our disposal. No one of these is going to solve this problem on its own.