Is the Scottish property market back in favour?

[Nicholas Wallwork]

For many years the Scottish property market has been overshadowed by its neighbour south of the border but recent data suggests that Scottish property is coming back into favour. The period preceding the recent independence referendum and the fallout post the referendum did not help investors with their long-term planning. As a consequence, there is a suspicion that investors stood by the wayside while markets “returned to normal”. So, are investors now making a beeline for the Scottish property market? Will this continue in the longer term?

Property sales

It was interesting to see that property sales increased by 15% in the final quarter of 2015 which is the highest since the recession began back in 2008. This is obviously very encouraging for the Scottish property market as is the fact that property prices are at their highest level since statistics began back in 2003. While any one of these two factors would be encouraging, the two factors coming into play together would seem to indicate a sea change in investor sentiment.

Regional variations

There were significant regional variations, as you would expect, with Midlothian experiencing a 30% increase in the number of property sales and Edinburgh just over 21%. The situation is very different in Aberdeen where the ongoing demise of the oil industry is hitting the area very hard. The number of properties sold fell by 12% over the period and there is an ongoing reduction in property prices.

If we put Aberdeen aside for the moment there is every chance that Scottish property prices, and underline market activity, will continue to improve. This renewed appetite for Scottish property would also seem to indicate a growing confidence in the underlying Scottish economy. Time will tell……….

Political risk

Even though there was a period of relative inactivity as the independence referendum came and went, perhaps markets are now more au fait with the pros and cons of such situations? Many expect further pressure for another independence referendum in the short to medium term although this is unlikely to have any material impact on investor sentiment in the immediate future.

There may be some political risk in the fact that the SNP party is now dominating Scotland and constantly at loggerheads with its UK counterpart. Hopefully all parties will come together in the long-term for the good of the UK and Scotland but at this moment in time there is a residual political risk going forward.

Scottish economy

When the Scottish government take control of a variety of tax levers over the next few years this will give them greater influence over the Scottish economy. The economy has underperformed the rest of the UK in recent times but perhaps we are now entering a new era of more focused governance and more control over the Scottish economy by the Scottish authorities. Whatever happens in the short to medium term there will always be concerns regarding long-term independence, but at this moment in time investors seem to have a growing appetite for Scottish real estate.

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[nmb]

It is a shame that the political situation in Scotland overshadows an economy which has the potential to do very well. Just prior to the independence referendum a number of large UK companies suggested they would move their head offices from Scotland to England to avoid any confusion regarding the future currency of an independent Scotland and monetary policy.

Personally I think that we are coming out of the "independence cloud" when many investors sat on the sidelines awaiting developments. There will likely be further pushes for independence referendums in the future but at this moment in time investors seem to be discounting these. There is potential for further improvement in the Scottish property market as a whole although Aberdeen is likely to suffer for some time to come because of the oil situation.

 

[PropEx]

I think the companies were right to say they would move. Imagine if RBS was in an independent Scotland and another crisis hit, would the Scottish Government have the money to bail it out? I think not.

 

[nmb]

Living in Scotland I am more aware than most of the ongoing threat of a second independence referendum. Nearly a year and a half after the first referendum only now are we starting to see signs of recovery in demand for Scottish property. While the popular press continues to suggest a second independence referendum could happen within the next five years the investment markets are not indicating this.

When you bear in mind that investment markets, essentially information exchanges, work on cold hard facts and figures who do you believe?

 

[PropEx]

Living in Scotland I am more aware than most of the ongoing threat of a second independence referendum. Nearly a year and a half after the first referendum only now are we starting to see signs of recovery in demand for Scottish property. While the popular press continues to suggest a second independence referendum could happen within the next five years the investment markets are not indicating this.

When you bear in mind that investment markets, essentially information exchanges, work on cold hard facts and figures who do you believe?

With me being Scottish, I too am aware of the threat, but I reckon that is just what it is, a threat. The "Yes" voters have had their chance and they lost and in a way only have themselves to blame. The 4 places where they won were the places with the lowest turnout! Generally swing voters stay with the status quo in any vote.

The house prices in Aberdeen were ridiculous a couple of years ago, but there are still some great deals to be had in Scotland.

 

[nmb]

Recently there was a damming article (in the Telegraph?) which painted a picture of how it would have been for Scotland's first budget in March 2016 as an independent country. It certainly did not make for good reading!

It will always be bubbling under the surface but the fall in the oil price and the SNP attempting to tie future devolved Scottish income tax to any increase in English income tax has played into the hands of the Tories. Even the SNP are now inadvertently indicating that we are all "Better Together".