While Scotland’s first minister Nicola Sturgeon’s announcement to trigger the formal process to begin a second independence referendum next week will cause uncertainty, sector experts had a mixed opinion on the move.
Stephen Lewis, managing director of HFD Property Group, said: “Putting to one side the legitimacy of calling for a second referendum after only 30 months, the uncertainty caused by seeking another vote has the potential to impact investor confidence.”
This was evident at the time of the last Scottish independence referendum. Research by Cushman & Wakefield showed investment volumes dropped before the vote in September 2014.
In the second quarter of 2014, they were down to £397m from £687m in the first quarter.
After the vote to stay in the UK, transactions jumped again to £959m in the third quarter, as paused deals went through in October.
Lewis said: “Taking Glasgow as an example, we have the strongest supply and demand imbalance for over 10 years with prime sites, including our own Bothwell Exchange, ready for development but securing speculative development funding is hampered. Post Indyref1 and Brexit what we need is a period of stability, not the opposite.”
He added that dampened investor confidence had the potential to affect development, which made gauging the value of assets difficult when selling.
But David Lea, senior analyst for Western Europe at Control Risks disagreed.
He said: “I think there is a brand new issue in play this time round and there could be more meat to this question. Brexit has been that new issue and that will change a lot of attitudes towards indyref2. I think this could be quite significant. The prospect of an independent Scotland with EU membership could be rather more attractive to investors and businesses.”
And for one overseas investor, it was the asset itself that mattered.
A spokesman for APG, which took a 75% stake in Edinburgh’s £1bn St James Quarter development last year, said: “For APG as a long term investor, what counts is the quality of the asset, trusting that it will perform on its own merits and grabbing the opportunity when it’s there.
“APG’s investment in the Edinburgh St James shopping centre speaks for itself: it’s about striking the iron when it’s hot, not waiting for it to have cooled because you’re afraid to burn your fingers – because then the opportunity is lost.”
According to Savvas Savouri, chief economist and partner at Toscafund Asset Management, it was important not to exaggerate the impact of a second independence vote.
He said with, or without the referendum, the property sector was put off by the SNP, which it saw as unfriendly to the private sector.
But he added that the SNP’s new powers from April this year would mean it would get unprecedented fiscal powers anyway.
Savouri added: “We must get away from this preconception that only with independence will the SNP run Scotland. They can influence tax, occupancy and rental growth without having full independence.
“From a property investment angle, it is everything to do with how the SNP will wield its powers from the new fiscal year in April when it can do things it couldn’t do before.”
While he thought it was unlikely people would vote for Scottish independence, such an outcome would put downward pressure on the pound and could pave the way for opportunistic investors.
He added: “Whenever the pound goes down, it makes UK property look more attractive so, if yesterday was to push the pound down, it makes prospects for sterling assets more attractive, including Scotland.”
David Davidson, Cushman & Wakefield’s chairman in Scotland, added: “Indyref2 will be the third referendum in four years in Scotland and we therefore have some perspective that we didn’t have in 2014.
“Activity levels were lower than in non-referendum years, but tenants with lease events relocated and investment properties traded. Glasgow and Edinburgh had robust levels of office take-up in 2016.
“While some investors sensed increased risk, some saw opportunity. Perhaps after the surprise of the Brexit and Trump votes, the prospect of more change in Scotland will seem less of a concern and perhaps politicians north and south of the border can get on with the job of growing the economy.”
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