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SPECIAL FEATURE: Scotland the brave

Sarah Davidson

September 17, 2015

The year 2014 was a significant one in the history of Scotland. During the past 12 months, the country has played host to the Commonwealth Games and Ryder Cup.

Staging these major sporting events projected Scotland on to the world stage, bringing major infrastructure investment and a boost in tourism figures.

If this wasn’t enough, there was also the independence referendum, which polarised the country and ended with Scots choosing to remain part of the United Kingdom.

The referendum created great debate and engaged people of all ages in politics, with a turnout of 84.5% it set a new record for any election held in the UK.

Despite the positives, it is fair to say that the referendum led to a level of economic uncertainty across not only Scotland, but the whole of the UK.

Many Scots rightly feared for their jobs as a number of leading corporates declared that they would close their Scottish operations in the event of a yes vote.

This inevitably led to a dip in consumer confidence, with an increasingly number of Scots putting their spending plans on hold until the outcome of the referendum.

The residential property market was one of the key sectors to be affected by the uncertainty, with the referendum providing a speed bump in its continued balanced recovery.

Latest figures from the Registers of Scotland show that the value of the market in 2014-15 was up 42% from the previous five years.

However it is interesting to note that the average cost of a property in Scotland fell by 0.2% in August 2014, the month of the referendum.

Despite the dip, the market has bounced back and maintained its upward trajectory as people have more stability and security to take forward their spending plans.

This has been reflected in a recent residential market survey by the Royal Institution of Chartered Surveyors which found that Scotland’s supply of residential housing is rising at a faster rate than anywhere in the UK.

RICS members are also reporting a steady increase in in demand from buyers, with expectations that prices will continue to rise, both in the next few months and over the course of next year.

It is also worth looking at how the regions are performing.

Aberdeen continues to be the star performer.

Buoyed by the oil boom, figures from the Registers of Scotland show that the average house price in Aberdeen City has risen by 87% in the past decade, jumping to £217,821.

With oil money pouring in, Aberdeen has been insulated from the pain being felt across the rest of the UK, and has become the best performing area outwith London.

However this may be about change, with some predicting that the recent oil crisis will have a knock-on effect and cause prices to tumble in the next 18 months.

Edinburgh on the whole has always been a relatively steady market, benefiting from being the second largest financial centre in the UK with a thriving diverse economy.

With average prices increasing in line with economic growth, we can safely suggest that the area will remain stable in terms of sales.

To a lesser degree, you can say the same for Glasgow, although the price increases have seen the smallest growth.

I would have also expected Glasgow to have benefited from a post-Commonwealth Games bounce, however there isn’t really much evidence to support this, despite the continued investment in infrastructure.

So with Scotland remaining part of the UK and the property market enjoying stable growth, the uncertainty has also been lifted for financial intermediaries and lenders operating in the space.

Scotland is very definitely open for business for firms based in Scotland and around the rest of the UK.

The FCA will take the reins of the secured loans market from April 2016, bringing a whole new level of rules and compliance demands.

Under the new regime, second mortgages will be leaving the Consumer Credit Act framework to fall within the Mortgage Credit Directive.

This will mean that the artificial division between first and second mortgages will end, bringing new opportunities and challenges for those advising and recommending secured loans.

The good news is that the result of the referendum means that the regulator will remain the same and those operating in the space can continue to push ahead with their preparations for the new regime.

The result also brings opportunity to the market and I expect the number of lenders to increase, which will bring greater choice and benefits to the consumer.

There will also be opportunity for mortgage advisors to expand their offering under the new regulatory regime and grow their second charge business as Scots use their property equity to fund investments plans.

With a number of factors boosting the market place, including the Help to Buy Scheme and replacing Stamp Duty with the Land and Buildings Transaction Tax, I expect the residential property market in Scotland to maintain stable growth.

Of course the referendum provided a brief dip, but the renewed certainty will ensure it maintains an upward trajectory.


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