Over the last few days there has been much debate with regards to the Scottish independence movement and this now seems to have shifted towards the business arena and commercial property. A number of prominent property experts have been very vocal in the press of late with suggestions that commercial property prices could rise or fall within an independent Scotland. Why do there appear to be so many different views about the Scottish property sector?
There are many different factors to take into consideration with regards to commercial property within an independent Scotland. Some of these have been discussed in the wider media while others have been discussed within the relatively niche areas of the UK/Scottish property sectors.
Uncertainty breeds uncertainty
There is no doubt that some commercial property investors are giving Scotland a wide berth at the moment purely and simply because nobody knows what the situation will be after the vote in September. Many investors have gone on record to confirm they are holding back, awaiting clarification after the vote in September, and this is taking some potential buyers out of the market.
Quote from PropertyForum.com : “While many people had expected today’s announcement that the UK government would not contemplate a currency union with Scotland in the event of a yes vote in September’s referendum, it has certainly been headline news.”
The situation has been complicated somewhat over the last few days with the UK government effectively ruling out a sterling currency union and the Scottish government threatening to renege on its share of national debt. The very thought of an independent Scottish government reneging on its share of the UK national debt has sent ripples through the money markets with suggestions that Scotland would become something of a financial pariah if this was to happen.
Freedom to control Scotland’s economy
While there are many who favour retaining the union and the current political/fiscal relationship between Scotland and the rest of the UK, there are others who believe that the Scottish economy would prosper better if full control were given to the Scottish Parliament. In order to find some balance to this argument, it seems fairly obvious that policies made in Scotland for Scotland would be more beneficial for the local economy, leading to the potential for significant growth. However, what about Scotland’s international standing?
There are very few people who would disagree with the fact that Scotland “could” be an independent nation and a potentially rich independent nation. However, there are other factors to take into consideration with regards to commercial property such as the fact that weightings in various property indexes quote the UK. If Scotland was to go independent then the commercial property arena north of the border would disappear from many of these property indexes and investment could potentially reduce overnight.
There are pros and cons with regards to investment in the Scottish commercial property sector in light of independence. The simple fact is that at this moment in time all we know is that as an element of the UK commercial property sector there are certain benefits for the Scottish market which could well disappear in light of independence. There are other factors which could potentially increase demand for commercial property in Scotland in the event of independence (such as public services moving north of the border) but the reality is that we are taking a step into the unknown.
Those who invest in worldwide investment markets will be well aware that uncertainty is the one thing which markets dislike. Uncertainty brings about an increased risk factor, can be off-putting to some investors and a short-term issue can very quickly create long-term problems. The truth is that nobody can say with any certainty what will happen to the Scottish commercial property sector in light of independence and this alone is causing concern amongst investors.