The Scottish property market is starting to show signs of life with sales up 8.1% in the first quarter of 2013 compared to the same period in 2012. Cumulative sales figures increased from £2.8 billion to more than £3 billion although at the same time the average value of a property in Scotland fell by 0.3% to £153,102. While it may seem a little bizarre that there is more activity in the Scottish property market, but prices have fallen, there are some very buoyant markets although there are some depressed areas.
As you might guess, Edinburgh featured heavily in the total sales across Scotland with an increase of 16.5% the majority of which were flat sales. It was also interesting to see that, yet again, Aberdeenshire with an average property price of £215,589 is the most expensive area of Scotland. This is a £10,000 increase since last year although when you bear in mind the city of Aberdeen is heavily reliant upon the oil industry perhaps it is not such a surprise.
To give you an example of how varied performance was across the Scottish property market over the last 12 months, the average property in East Renfrewshire increased by 6.2% while properties in Argyll & Bute fell by a dramatic 11.9%. This illustrates the difficulty of investing in Scottish property because not all markets move in the same direction and the relative performance can show a marked difference. International investors seem to focus on areas such as Edinburgh and Aberdeen which are very liquid markets and seem to reflect the underlying economic situation.
Is independence having an impact?
The Scottish independence vote occurs in 2014 and while all sides continue to squabble about the pros and cons of independence, this is unlikely to have any major impact upon the property market in the short term. Recent reports suggest there is an overwhelming majority of the Scottish population in favour of remaining part of the Union and while this may change in the short to medium term before the vote, it is not seemingly a major concern for property investors.
Quote from PropertyCommunity.com : “New research shows that UK landlords renting out properties in the private rented sector are middle aged, well educated and mostly work in the private sector.”
If the “yes vote” was to take the high ground and it looked as though Scotland was heading for independence, which may or may not be financially beneficial in the long-term, this would likely inject some concern into the marketplace. The concern may turn out to be baseless but the fact is that investors like to know potential risks so that they can factor in various elements when calculating fair value. Even if they were to be made aware of the worst-case scenario with regard to future taxes and future property prices in Scotland, this would still enable them to factor in the future financial impact.
It is interesting to see an increase in sales across Scotland and while this has not followed through with the average price of property across the country, it is an encouraging move. Many estate agents are reporting significantly higher viewing figures and indeed many are confident of increased sales of property in Scotland in the short to medium term. At this moment in time the issue of independence has been largely ignored although as we move further towards the vote in 2014, and assuming there is a swing in the polls, we may well see international investors taking more notice of the potential changing economic environment.
However, at this moment in time the Scottish property market on the whole seems relatively healthy and unless the UK economy and the Scottish economy take a serious downturn, there is scope for optimism in the future.