The subject of Scottish independence is headline news right across the UK, and many parts of the world, with a constitutional crisis brewing between the UK and Scottish governments. Aside from all the constitutional issues, many people are now starting to look at the prospects for the Scottish property market when considering the potential changes going forward. So, how would Scottish property fair in an independent Scotland?
In or out of the UK/EU
As you might expect the vast majority of the Scottish population living in the more prosperous regions such as Edinburgh voted to remain in the European Union. There was a similar pattern in the UK with the London and other prosperous regions also voting to remain. The conclusion is that some of the less prosperous regions of the UK, including Scotland, voted to leave the European Union perhaps because of a lack of progress with regards to local economic growth. There have also been issues with in relation to immigration which is a material part of the UK property market conundrum going forward.
We could see a situation where Scotland is out of the UK and out of the EU or in the UK and has a sensible trade deal with the European Union as part of the UK. Alternatively, if a trade arrangement cannot be made with the European Union, and Scotland remains part of the UK union, this could see a significant impact on the Scottish property market.
Uncertainty is the key
The reality is that the Scottish property market has performed relatively well in recent times although it is still lagging the rest of the UK. Some areas of the property market are struggling while others remain fairly buoyant but on the whole the performance has been “acceptable”. As we approach a constitutional crisis, Brexit talks and local elections in Scotland there could be some significant slowdown in Scottish property investment.
Whether the endgame is positive for Scotland or not it is the uncertainty of the next few years which will cause most problems. Quite simply, would you invest in a company which could see a material change in its ownership and the way it is run in the short to medium term? Even if the potential changes were positive going forward there is no guarantee so why would you risk your money today when you can hold off and buy with more certainty tomorrow?
The Scottish government and the UK government are at loggerheads when it comes to immigration because of the very different views expressed by the population. The Scottish government seems to be more welcoming of immigrants into Scotland, which obviously helps demand for Scottish property, while there is a rising concern about uncontrolled immigration in the rest of the UK. It is also worth mentioning that while talk of “cutting immigration from Europe” tends to grab the headlines this is not the case. In the future, if the UK move to leave the EU is successful, then immigration numbers will simply be controlled. There will still be visitors moving to the UK who will go through the traditional visa application systems but this will be very different from free movement.
Over the last couple of days we have seen significant mention of a future Scottish currency with ideas such as retaining the pound, introducing the Scottish pound, using the Euro and pegging different currencies to sterling, all in just a couple of days at the SNP conference. Again, this type of uncertainty is not helpful for the Scottish property market and we may well see investors deciding to sit on the sidelines watching matters develop before investing significant amounts into the Scottish property market.
Then again, if the UK is unable to agree a suitable trade deal with the European Union and Scotland manages to retain some kind of membership of the EU then maybe Scotland will become a more attractive option than the UK property market?