There is gathering anecdotal evidence that uncertainty around the Independence debate is becoming a concern for some buyers and sellers. As the Scottish property market recovers from the economic downturn, this uncertainty has the potential to stall the market once again.
Around 65% of residential transactions in Scotland every year are dependent on a mortgage, and lending rates applied in Scotland would therefore have the biggest impact on the market post Independence.
As a new country with a small economy on the periphery of Europe, it is likely that Scotland would incur a higher credit risk, and therefore have a lower credit rating than the rest of the UK.
This was suggested in a HM Treasury report published last summer which highlighted the perception of the Scottish banking sector as being more vulnerable, resulting in possible higher risks and higher funding costs that could be passed on to consumers. Potential increased risk would probably mean an independent Scotland incurring higher mortgage rates, putting upward pressure on household finances and potentially driving down the value of housing, as buyers seek affordability. This might lead to the residential market stalling once again, with sellers unwilling to accept lower prices, just as they did during the recent economic downturn.
Whether an independent Scotland would have a negative impact on Edinburgh’s position as a financial services hotspot and Aberdeen’s energy sector is debatable. Edinburgh’s strength in asset management, banking and insurance sectors will continue to sustain its economy post Independence, as long as the leading institutions do not pull their head offices out of Scotland.
Energy companies are unlikely to desert Aberdeen post Independence. There remains up to 20 years of oil reserves in the North Sea, and more interestingly Aberdeen has become a global hub for expertise in oil and gas extraction in other parts of the world, so it is not wholly dependent on North Sea oil. It is, therefore, unlikely that there will be a rush of energy companies deserting Aberdeen in the event of a Yes vote.
Scotland’s natural scenic beauty and quality of life are likely to remain a pull factor, whatever the outcome of this September’s referendum. In our experience, the purchase of a Scottish property by the ultra-wealthy is a luxury and buying decisions are made on an emotional whim, and are unlikely to be influenced by political-economic factors.
Similarly, the outcome of the Referendum will not impact on purchasing decisions for those selling in Scotland and intending to remain in Scotland.
Those who have strong Scottish connections and who have perhaps held a long-term commitment to return north, perhaps for schooling, family or lifestyle reasons, may not be easily discouraged from doing so in the event of Scottish Independence.
However, Scotland’s housing market recovery is becoming increasingly reliant on buyers from the South moving to Scotland in search of a better quality of life and value for money. The number of applicants who registered with Savills to buy north of the Border doubled in 2013. We believe this positive facet of our market could be hampered in an independent Scotland.
There is a lack of information from pro-Independence campaigners about the fundamental issues of currency, mortgages and property taxation. These are the factors that buyers and sellers of Scottish residential property will need to consider before casting their votes in September.
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