Scottish house prices have so far shown no negative response to the independence debate with prices up 1.1% in January, the largest monthly increase for over four years.
Average prices are also up 3.9% year on year, the largest annual increase since September 2010, according to data from the latest LSL/Acadata Scotland House Price Index. It takes the average house price to £160,270.
‘The enthusiasm of property investors suggests the independence debate is having no impact on confidence within the Scottish housing market. Scottish prices were up £1,680 in January,’ said Donald MacLellan, chairman of Walker Fraser Steele Chartered Surveyors, part of LSL Property Services.
He pointed out that five consecutive months of rising prices indicate the market has bounced back fast as it gathers the fruits of the wider economic recovery. ‘Whether the possibility of Scottish independence throws up all sorts of question marks such as the economic cost of a separate monetary system for Scotland, currency risks, changes to stamp duty and land tax, the property market seems currently unaffected,’ he explained.
‘And whether some businesses are alarmed by the prospect of the use of a currency other than sterling, a development that might lead to a rise in transitional risks, large business costs, with corresponding implications for jobs, as of yet there is little obvious impact,’ he said.
‘Banks such as RBS and Standard Life have threatened to leave Scotland altogether and decamp to England, possibly causing a drop in net lending. But if a yes vote for independence looked like the more probable outcome, we would expect this uncertainty to have manifested itself in property prices. As we can see, there has been no such impact on the housing market,’ he added.
The LDL data also shows that 2014 recorded the highest volume of sales in a January since 2008. ‘Increased lending and mortgage availability are reaching heights not seen since before the recession as first time buyers return to the market en masse. Mortgage finance, for those who can access it, is at its cheapest for some time,’ said MacLellan.
‘This is sustaining activity in all sections of the market, specifically buy to let investors and homeowners looking to upgrade. The spring market in Scotland will see more lending to first time buyers thanks to cheaper rates, a boost in high loan to value mortgages and the support of Help to Buy,’ he added.
He also pointed out that the lack of supply in properties in Scotland is boosting competition between new and previous buyers, propping up prices, adding that the property market doesn’t appear to think things are set to change any time soon.
Interest in Scottish rural estates remains relatively healthy despite the independence referendum and the possibility of new land reform legislation, it is claimed.
When it comes to the more specialist sector of the property market, real estate experts believe their could be an impact in the run up to the vote in September but it is likely to be short lived.
For example when it comes to estates many buyers are from abroad and to date are not showing concerns that puts them of buying in Scotland. According to property consultants CKD Galbraith, there are prospective buyers emerging from London, Hong Kong, Singapore and the Middle East as well as Scotland, encouraged by improvements in the general residential property market.
The firm expects a slowdown around the time of the referendum but reports that to date there has been no compelling evidence that the debate has had a negative effect on estate sales. It believes that impending legislation on land reform, which will be introduced post referendum and before the next elections in 2016, will have more of an impact on estate owners and their land based business activities.
‘The question on most people’s minds this year is what possible affects the impending referendum will have on the demand and supply of Scottish estates. To date, there is no compelling evidence that the referendum has had a significant negative effect on the estate market,’ said John Bound, partner and head of CKD Galbraith’s estates division in the Highlands.
‘Indeed, there is some evidence, in the form of recent estate sales in the Borders and Argyll that some prudent purchasers are keen to buy now and are taking the view that prices may well rise, post referendum. However, as is generally the case in general election years, we anticipate that the uncertainty of the referendum may slow the estate market down in 2014,’ he added.
According to an analysis from Savills wealthy buyers from England and abroad are still going to be drawn by Scotland’s natural scenic beauty and quality of life whatever the outcome of this September’s referendum. ‘In our experience, the purchase of a Scottish property by the wealthy is a luxury and buying decisions are made on an emotional whim, and are unlikely to be influenced by political and economic factors,’ said Faisal Choudhry Associate director for residential research at Savill’s Glasgow office.
‘Similarly, the outcome of the Referendum will not impact on purchasing decisions for those selling in Scotland and intending to remain in Scotland. Those who have strong Scottish connections and who have perhaps held a long term commitment to return north, perhaps for schooling, family or lifestyle reasons, may not be easily discouraged from doing so in the event of Scottish Independence,’ he explained.
‘However, Scotland’s housing market recovery is becoming increasingly reliant on buyers from the South moving to Scotland in search of a better quality of life and value for money. The number of applicants who registered with Savills to buy north of the Border doubled in 2013. We believe this positive facet of our market could be hampered in an independent Scotland,’ he added.
He also believes that there is a lack of information from pro-Independence campaigners about the fundamental issues of currency, mortgages and property taxation. ‘These are the factors that buyers and sellers of Scottish residential property will need to consider before casting their votes in September. Around 65% of residential transactions in Scotland every year are dependent on a mortgage, and lending rates applied in Scotland would therefore have the biggest impact on the market post independence. Potential increased risk would probably mean an independent Scotland incurring higher mortgage rates, putting upward pressure on household finances and potentially driving down the value of housing, as buyers seek affordability. This might lead to the residential market stalling once again, with sellers unwilling to accept lower prices, just as they did during the recent economic downturn,’ explained Choudhry.
He pointed out that whether an independent Scotland would have a negative impact on Edinburgh’s position as a financial services hotspot and Aberdeen’s energy sector is debatable. ‘Edinburgh’s strength in asset management, banking and insurance sectors will continue to sustain its economy post independence, as long as the leading institutions do not pull their head offices out of Scotland,’ Choudhry said in his analysis report.
‘Energy companies are unlikely to desert Aberdeen post Independence. There remains up to 20 years of oil reserves in the North Sea, and more interestingly Aberdeen has become a global hub for expertise in oil and gas extraction in other parts of the world, so it is not wholly dependent on North Sea oil. It is, therefore, unlikely that there will be a rush of energy companies deserting Aberdeen in the event of a Yes vote,’ he added.
This article was republished with permission from Property Wire.