New research finds property investors undeterred by ‘Neverendum’
New research by Morton Fraser has found that Scottish independence is not a priority for UK property investment in Scotland as long as yield outperforms other regions.
The study of British property investors has revealed that the issue of Scottish independence ranks lower in importance than rental yield, capital growth and a stable tax environment. Just 21 per cent of property investors said independence was an important factor – less than half those who mentioned rental yield (46 per cent).
According to the Morton Fraser survey, one in four property investors is open to investing in Scotland with more than one in 10 (11 per cent) actively monitoring or currently pursuing opportunities. Proportionately, this is above the nation’s 8.9 per cent share of the UK commercial real estate market.
The survey also negates suggestions that the so-called “Brexit” referendum will dramatically affect property investment sentiment towards Scotland in the longer term. Eighty-five per cent of respondents to its study confirmed that leaving the EU would have no impact at all on their likelihood to invest in Scotland.
The impact of Scottish independence – seen as more likely in the event of a Brexit – would be only slightly more significant, with 79 per cent of property investors claiming Scotland separating from the UK would not affect their decision to invest.
David Stewart, commercial real estate partner at Morton Fraser, said: “Viewed in context, one in four investors leaving the door open to entering the Scottish market and over one in ten actively pursuing investment opportunities is much more positive than it can appear at first blush.
“It is easy to overestimate the potential impact of Scottish independence on the property market. Investors are ready to enter the market if the right opportunity arises, regardless of the political status of the country. That gives us optimism for the future of the Scottish real estate industry.
“If the price is right and the market conditions are at least on a par with other regional areas across the UK, investors will follow the returns. The prospect of a neverendum in Scotland may drag investment, but it’s not the deciding factor for many.”
With rental yield the number one criterion for potential British property investors looking to enter the Scottish market, Morton Fraser has uncovered the “tipping point” at which a yield premium would encourage investment.
Of the property investors likely to invest in Scotland if there was a higher yield premium, 70 per cent said a benchmark of more than 3 per cent or higher would encourage them to invest, with 31 per cent saying more that 5 per cent. That figure should be viewed in the broader context of many respondents being initially “cold” on investing in Scotland, so the true figure for active investors is likely to be sharper.
Mr Stewart added: “Many investors are prepared to overlook ideological or political issues to run the rule over Scottish property investments. The ‘yield gap’ between Scotland and other regional cities in the rest of the UK can always be met with a quality opportunity – whether you are looking to invest in Edinburgh or Manchester, Glasgow or Bristol, a high quality asset will always stand on its own merits.”