One year on from the Referendum, and despite political and fiscal changes, Scotland’s real estate market is attracting investment across the residential, rural and commercial sectors, according to Savills Research launched today (23rd September 2015) in Glasgow.
One year on from the Referendum, and despite political and fiscal changes, Scotland’s real estate market is attracting investment across the residential, rural and commercial sectors, according to Savills Research launched today (23rd September 2015) in Glasgow.
The Research found that the comparative value for money of Scottish real estate is driving purchasing decisions across all sectors.
Residential
The introduction of LBTT (Land and Buildings Transaction Tax) in April has contributed to the growth of Scotland’s mainstream residential market, but delayed the recovery of the prime sector in the medium term. According to the Research, Edinburgh is the exception to the rule, where the prime market is attracting buyers from London and overseas who remain cautious about investing outside the capital. Scotland is outperformed the UK residential market as a whole by the end of 2015, with a 3.5% growth in values in Scotland compared to 2% south of the border.
Faisal Choudhry, Head of Savills Residential said: “There has been a notable shift to bottom up growth in Scotland’s residential market. UK and Scottish Governments have introduced initiatives to the lower value levels of the market, in an attempt to revive both the house building industry and buyers on the early steps of the property ladder. Buyers of homes below £400,000 are also enjoying more favourable rates of LBTT, while those above £500,000 are taking on the burden of the new progressive taxation in Scotland.”
“This contrasts with the picture last year, when it was prime property that was leading the resurgence. However, the Referendum raised a number of difficult questions, and the resulting uncertainty stalled the prime market, which has traditionally been boosted by the prevalence of southern buyers. A year on, this key target group remains anxious about LBTT and the forthcoming Scottish Rate of Income Tax.
Andrew Perratt, Head of Savills Residential Market said: “While there is no doubt that the introduction of LBTT has stalled prime market activity in Scotland, buyers from south of the border are beginning to re-enter the market, encouraged by value for money in Scotland. International buyers continue to be prevalent, particularly in Edinburgh and Glasgow’s West End.”
Rural
According to Savills Research, there is a total pool of £300 million currently chasing farms and estates in Scotland. Evelyn Channing of Savills Rural said: “The appetite for Scottish estates unabated, particularly from foreign climes.” A better understanding of Land Reform is helping to allay concerns from potential buyers. Looking at the farmland market, record low supply (due to CAP uncertainty and bad weather) is upholding values, with a widening gap not only between England and Scotland, but also between the most and least sought after land.
Commercial
£3bn was transacted in Scottish commercial property in 2014 and investor activity has continued this year. This is largely due to Scotland offering more attractive income returns, relative to other parts of the UK. According to the research, US investors are seeking better quality and higher yielding product, particularly in the secondary market. Scotland continues to offer a discount compares to other regional cities due to lower levels of stock and the strong occupational market. According to Bruce Patrick, Savills Commercial Director: “Whilst ten years ago Irish investors were the dominant force in the commercial investment sector in Scotland, we are now seeing private equity driving much of the market, mainly originating from the US.”