Over the last 10 years there have been some extreme challenges for the property market in Scotland and in reality these challenges are far from over. We have the run-up to the 2014 Scottish independence referendum, and the actual referendum, we have had capitulation of the Labour Party, the Tory party losing its charismatic leader in Scotland and the SNP continuing to rule the roost. We stand on the verge of yet another independence referendum, challenge for an independent Scotland to join the EU and all of the government financial challenges north of the border.
Supply and demand
It is fair to say that supply of homes has lagged demand for many years in Scotland and the rest of the UK. There is a suspicion that this is a political ruse by which to maintain the value of people’s homes and attract their vote. Whether this is true or not is debatable but there is no doubt that despite talking the talk, few national and local governments in the UK have delivered on their promises.
Interestingly, some experts believe that the emergence of Airbnb has exacerbated the supply problem taking an estimated 7000 Edinburgh homes out of the market. This may seem relatively small numbers but the reality is that withdrawing yet more supply from a market starved of newbuilds does not help the ongoing situation. It will be interesting to see how the SNP tackle the problem of supply in the Scottish property market. Increasing property taxes in Scotland certainly wont help!
Long-term business decisions
Whether in favour of independence or Scotland to remain as part of the UK, there is no doubt that long-term business decisions are impacted by this constant argument. Despite the fact that the Scottish people voted in 2014 to remain part of the UK, leading independence protagonists continue to muddy the water and shout for another independence referendum. There is the issue of currency, economic growth and Scotland’s current budget deficit which is around 7.2%. When you bear in mind that entry to the European Union means that you need a budget deficit of no more than 3%, this presents huge challenges for the ruling SNP party.
We have also seen a number of financial institutions north of the border suggesting that the size of Scotland’s economy as an independent nation would not be able to cope with the type of financial woes last seen in 2007/8. As a consequence, many Scottish financial institutions would move their head offices to the England so they would come under the Bank of England’s protection and assistance schemes.
There has certainly been an improvement in the Scottish property market of late with Edinburgh leading the way. Looking ahead, there is no doubt that political shenanigans between all parties and constant cries for an independence referendum in Scotland will impact long-term business investment. Let’s face it; at this moment in time it is not clear what currency an independent Scotland would use. Retaining sterling may effectively bar Scotland from joining the European Union while signing up to the euro would bring with it an array of restrictions on Scotland’s budget. Many believe this type of move would effectively dilute Scottish independence prompting the question, why leave the UK in the first place?