The last few years have been very difficult for the Scottish economy and as a consequence the Scottish housing market has struggled. The latest economic data shows that Scotland is in the midst of a short-term economic recovery (in relative terms compared to the UK as a whole) although it still lags behind the rest of the UK in the medium term. So, what is pushing the Scottish housing market and which areas are benefiting most?
A recent report on the U.K.’s major cities shows that Edinburgh and Glasgow have improved dramatically and the rate of decline in the Aberdeen market (as a consequence of the oil price fall) has reduced significantly. In the year to September 2017, house prices in Edinburgh increased by 6.7% with Glasgow prices up by 5.3% (up from 1.8% last year). The rate of decline in Aberdeen house prices fell from 10.6% last year to just 1.8% and with the oil price recovering we should hopefully see a move to appreciation in the short to medium term.
As far as the UK picture goes, Edinburgh was top with Manchester second at 6.5%, Birmingham at 5.9%, Bournemouth and Leicester at 5.4% and Glasgow at 5.3%. While Aberdeen was in last place there are signs and hopes of a recovery in the short to medium term.
What is pushing Scottish house prices?
As we await data from the general Scottish market, it seems inevitable that a recovery in Edinburgh and Glasgow, and a partial recovery in Aberdeen, will be replicated right across the Scottish housing market. While the spectre of a second referendum on independence continues to cast a shadow over the economy, recent indicators suggest there is no support for a referendum in the short to medium term. Indeed there is some speculation that Nicola Sturgeon may at some point be forced to fall on her sword as support for her policies and style of governing continues to wane.
While those supporting independence will push for ever and a day to achieve their goal, the economic situation does not support independence, Brexit negotiations complicate the matter and there is still a strong core of Unionist supporters.
Investors looking outside of London
Over the last year London property prices have increased by 2.3% which is less than the rate of inflation and a fall in real terms. It is dangerous to predict what the London property market will do in the short to medium term, especially in light of Brexit, but there do not appear to be many reasons to buy in the short term. As a consequence, perhaps we are starting to see investors switching away from London and the South of England to the North and Scotland?
In times of buoyant housing markets investors tend to go for capital gains, and more stable investments in times of volatility. When you bear in mind that traditionally there are higher rental yields in the North of England, although reduced potential for capital gains, perhaps this is one of the reasons why investors are spreading their nets more widely?