We have to admit that we were surprised by the outcome of the ‘Brexit’ referendum vote on the UK’s continued membership of the EU that took place on 23 June 2016. Living and working in Scotland, and seeing now that our nation voted overwhelmingly to remain part of the EU, we were perhaps insulated somewhat from the tide of negative sentiment that has clearly washed-over large swaths of the rest of the UK. The question is whether this vote will negatively or positively affect property prices in Scotland.
We have said all along, in the lead-up to this vote, that we believe that Scotland’s property market is unlikely massively to be affected by the result of the EU referendum, whatever the outcome was.
We have also said all along that Scotland is not immune to wider economic trends and that, if the UK economy was badly hit by a vote to leave the EU, it will surely affect the property market in Scotland. If the vote to exit the EU causes wider unemployment, affects household income or negatively impacts upon mortgage market liquidity, the Scottish housing market would of course feel the negative effect.
We believe that the UK and the wider global economy will take a few days to come to terms with what, for many people, was a surprise result. Markets in general don’t like uncertainty, at the best of times, and this shock result will undoubtedly cause a large degree of uncertainty across the UK and also in global markets.
That said, we also believe that markets will rally and that it is unlikely that mortgage market liquidity will be significantly affected by the UK’s vote to exit the EU. With Scotland’s economy being less reliant on wealth created in the City of London, we would anticipate that, after a period of reflection, confidence in Scotland’s housing market amongst property buyers will not be negatively affected.
The vast majority of property buyers in Scotland are from Scotland, most often moving only a few miles from their previous location, so the market remains quite insular. Barring wider, surprise economic consequences, any reluctance of EU nationals to purchase property in Scotland should have a relatively small effect across the vast majority of property sellers, with the exception perhaps of the highest end of the market which accounts for only a small percentage of the number of properties that are sold every year in Scotland.
The unexpected positive outcome of this vote, from the point of view of the housing market in Scotland, is that when currency markets are volatile people look for safe havens for their money. Property has always been seen as a relatively safe bet and Scotland in particular represents a safer market than some parts of the UK because it is far less exposed to fluctuations in the City of London.
We do however believe that property markets in London and the South East of England will be negatively impacted by the UK’s vote to exit the EU. Property prices in London and the South East are more dependent than those in Scotland on jobs and wealth created by the City of London. Not only that, but demand for rental properties in the South East will surely be negatively affected if it is made less easy for people from the rest of the EU to come to live and work in Britain. Naturally, London is the focal point of that type of immigration from EU countries.