A report by PricewaterhouseCoopers has cast a very downbeat light on the Scottish housing market amid concerns about Brexit and the UK wide impact. Scottish economic growth is expected to hit 1.2% in 2017 falling down to 1.1% in 2018. This compares to England at 1.5% and 1.4% respectively, Wales at 1.3% and 1.2% although Northern Ireland at 1.1% and 0.9% is also struggling. This does not bode well for not only the Scottish property market but also the UK wide property market.
Scottish housing market struggling
While the rest of the UK has pretty much made up the fall from pre-crisis house price highs in 2007 there are many areas of Scotland which are still struggling. This comes amid forecasts of a 2.5% increase in Scottish house prices in 2017 compared to a fall of 0.2% in 2016. However, areas such as Inverclyde, East Ayrshire, North Ayrshire and West Dunbartonshire are the worst performers relative to their pre-recession peaks. Many may be surprised that Shetland is one of the strongest housing markets in the UK especially when you bear in mind its relatively isolated position.
Housing transactions down
There are a number of reasons why housing transactions in Scotland could be down in isolation but to fall for 12 consecutive months is a strong signal. It is suspected that many sellers are pulling away from the market and buyers are sitting on the sidelines, which is exacerbating the situation and perhaps not giving the true underlying position. The problem is that when prices continue to fall, and transaction numbers follow suit, buyers will be in no particular rush to invest and sellers will not want to give away their properties. So, we enter something of a stand-off….
Why is Scotland weaker than the UK?
The SNP government will see this report by PricewaterhouseCoopers as something of a breath of fresh air because it skirts around the subject of independence and the oil industry. Whether politicians like it or not, the uncertainty of yet another independence referendum in Scotland will stop businesses from investing and consumers from buying houses. There is also a knock-on effect to wage growth, consumer spending and also liquidity for the Scottish housing market.
The oil price recently started to show a degree of strength but this has faded somewhat and areas such as Aberdeen, dependent upon the oil industry, will have to wait for their recovery. House prices in that particular region have fallen dramatically since the oil price collapse and from an expected multibillion pound tax take the oil industry has turned full circle and is now being subsidised by the UK government.
Scotland has a potentially toxic mix of issues to consider such as Brexit, independence, a weakened economy and the oil industry. These issues are having a dramatic impact upon some areas of the Scottish housing market and until the uncertainty lifts it is difficult to see any prolonged recovery. There is nothing to suggest that Scotland cannot go independent from the UK but would it have survived the economic crisis we see today if it had not been part of the UK? Does the UK act as a cushion in times of economic stress or could the Scottish government do a better job?