Scottish independence could boost London property market

If Scotland's banks make good on promises to move to British capital, housing demand set to benefit after recent cooling, says Rightmove

PUBLISHED : Wednesday, 17 September, 2014, 5:52am
UPDATED : Wednesday, 17 September, 2014, 5:52am

London's property market could benefit if Scotland votes for independence and some financial institutions decide to relocate to Britain, according to Rightmove.

London would be a "logical destination, creating extra employment and knock-on demand for homes", the property website operator said in its monthly house-price survey on Monday. The report showed asking prices for homes in the capital rose 0.9 per cent in September from August, ending three months of declines.

Royal Bank of Scotland Group and Lloyds Banking Group said last week that they plan to move their legal bases to England if Scotland votes for independence tomorrow. The latest polls show the referendum result is too close to call.

"Whilst it's all speculation at present, the drop-off in foreign-based buyers could be replaced in part by individuals and companies moving out of an independent Scotland," said Miles Shipside, a director at Rightmove. "Their funds and target price brackets may not be as high as those of overseas investors, but could they nevertheless put a further strain on the capital's limited housing supply?"

London's property market has shown signs of cooling in recent months and Rightmove said that average asking prices in the capital are now 5.9 per cent below their peak in May. The slowdown is partly related a surge in prices since early last year that stretched affordability. In addition, foreign buyers were hit with tax increases and a strengthening pound.

Rightmove also said that average asking prices for homes in England and Wales increased 0.9 per cent this month from last month and were up 7.9 per cent from a year earlier. In London, asking prices reached £557,792 (HK$7.03 million), more than double the British average, after rising 13 per cent over the past year.

On a national level, there is a risk that Scottish independence could unsettle consumers and disrupt the housing market, Rightmove said.

The "possible implications for the economic outlook for the rest of the UK could cause uncertainty in the minds of potential home-movers contemplating a large long-term financial commitment," Shipside said. "Should the independence vote win the day, then there could be months of uncertainty with the forthcoming general election causing further disruption."


Price gap widens

The gap between London house prices and the rest of Britain has widened to the most in at least two decades after a surge in values in the capital over the past year.

Acadata and LSL Property Services said the average price in London is now £473,893 (HK$5.97 million), which compares with £185,496 in the rest of the country. That is the biggest gap since the Acadata records began in 1995.

London property led the recovery in the British housing market over the past year, with values rising about 20 per cent, twice the national average. As rampant inflation pushed more buyers in the capital to take out larger mortgages, the Bank of England put curbs on risky lending in June to prevent a buildup of consumer debt.

"What's happening in London may be eye-catching, but it is akin to looking through a kaleidoscope and skews any view of the current total housing landscape," said Richard Sexton, director of e.surv chartered surveyors, part of LSL. "Peeling back the regional layers gives a much more informed view of the core reality of the current housing market."

LSL estimates that home sales will total about 920,000 this year. While that would be the most in seven years, it is still lower than any of the years from 1996 to 2007. There are signs that London's housing market is cooling as buyers start to resist higher prices.