No matter where you go this week you will hear people talking about the Scottish referendum, and next Thursday the people of Scotland will decide whether to stay within the UK. At the moment figures are showing a predominantly fifty-fifty split between ‘yes’ and ‘no’ votes although they have been fluctuating over the past few days. As there is no getting away from the Scottish referendum PropertyQuoteDirect has decided it would only be right to report on what could happen to the property markets both in the UK and Scotland should they become independent:
Boom or Bust
One thing that no-one has been able to agree on during the run up to the referendum is whether Scotland would be better off if independent from the rest of the UK. The yes voters claim that by being independent Scotland will have more control over their economy meaning that they will be able to thrive in the future. However, no voters have stated that without the rest of the UK the Scottish economy will struggle, and there is still the issue of whether Scotland will be able to use the pound.
When it comes to the Scottish property market experts are also split about what will happen should Scotland gain independence. For example, David Marshall, business development manager at ESPC, said the country will face a ‘boom or bust’ situation, and added: “Ultimately the impact of independence on the market comes down to what you believe the impact will be on the wider economy. What we have seen over the past 12-18 months has been very much what you would want to see in a recovering market – prices have increased, but not shot up.”
The Issue of Mortgage Repayments
It’s not very often that Labour, Conservatives and Liberal Democrats agree, however recently they all said that if Scotland leaves the UK they will no longer be able to use the pound. There has been much controversy over this statement as the First Minister of Scotland, Alex Salmond, has claimed that he intends for Scotland to continue using the pound after they gain independence. Banks and mortgage lenders in particular are concerned over what currency Scotland will be using in the future, as if it changes mortgage prices are likely to increase.
Ray Boulger, mortgage expert at the mortgage adviser John Charcol, said: “Most Scots would end up with a mortgage on a Scottish property in a foreign currency. These are amongst the riskiest mortgage products available because of the impact that currency fluctuations can have on borrowers’ equity and their ability to carry on meeting the repayments.” Other financial products such as landlord insurance and pension schemes could also be affected should Scotland have to use a different currency.
The Future of Construction and Property Investment
With Scotland’s future being so uncertain a number of investors are waiting to see what happens next week before funding any new projects. For example, Brian Gilmour, managing director at bond aggregator Carduus, has recently said that six Scottish social landlords have already signed up for a new bond however a further eight are waiting to find out the results of next week’s vote before they do too.
He said: “From our discussions with institu¬tional investors, it appears to be their opinion of the added risk – it’s the added issue premium that they are incorporating due to the uncer¬tainty because of the Scottish refer¬endum.” The property market is also feeling the effects of the referendum and has notably slowed over the past few months.
Estate and letting agents have claimed that since the beginning of September they have seen a fifty per cent drop in business in some regions. Allied Surveyors in Edinburgh said: “There’s been a very noticeable slowdown.” Meanwhile, Chris Highton of Allied Surveyors, added: “People are concerned that prices will be affected: they’re thinking back to 2008-10 when the market was really dire.”
Until all the votes have been counted next week the future of the property and private rental markets in Scotland will remain uncertain. As we know more PropertyQuoteDirect will report on the changes in the markets both in the UK and Scotland.
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