There has been a lot of uncertainty recently about whether or not Scotland will remain part of the United Kingdom following the Referendum on the 18th of September this year. Many people are wondering what kind of impact this decision will have on the residential housing market. The Independence Debate is becoming quite a concern for some home buyers and sellers.
One of the main concerns is that as the property market in Scotland recovers from the economic downturn that has plagued it recently, this will cause a certain level of uncertainty – which has the potential to stall the market again. Also, although the vote will be held on the 18th of September, Scotland will not become independent until the 24th of March 2016 – which will mean 18 months of doubt and debates about the economic health of Scotland.
The Impact of the Property Market
The residential property market already has a great significance in the Scottish economy – equalling approximately £13 billion worth of transactions. According to Savills Research, the value of housing at the end of last year was nearly £300 billion.
It is thought that if Scotland becomes independent, this will have a potential impact on mortgages. If Scotland retains the Pound Sterling as their currency upon becoming independent – they will have a monetary policy that is under the control of the Bank of England. This means that the Bank of England will be able to set the interest rates that the mortgage rates are based upon.
Since Scotland will be a new country, they will probably have a lower credit rating and will incur higher credit risk. Because the Scottish banking sector will be more vulnerable, this will result in high funding costs which will be passed on to their consumers.
In this scenario, Scotland would incur higher mortgage rates – which would put a lot of pressure on the finances of the average household and would drive down the value of the housing. This could potentially bring about the stall of the housing market again – because sellers would be unwilling to accept lower prices.
If Scotland Adopts Its Own Currency
So what happens if Scotland becomes independent and adopts its own currency? The newly created currency would add complications in the form of exchange rates. If the Scottish currency is strong, this would be a deterrent for international property buyers who are looking for a good investment. However, if the currency is relatively weak, then Scotland would be a desirable destination for good value property investment.
Also, there would be a number of other factors that would have their own effect on the property market – such as the taxation level, welfare spending, fiscal freedom and much more. These are just a few of the many factors that play into this complex issue. The verdict that is determined in September will be a major one that could potentially have a major impact on buyers and sellers of Scottish residential property.
If you are looking to invest north of the border, then remember to get a great rate on your insurance with Discount Landlord.