Independence could be ‘catastrophic’ for Scotland’s house prices

I’m amazed by how little attention either side of the Scottish referendum debate have given to house prices in the last few weeks, given how much the British (yes, all of us) care about house prices.

The Yes side has been busy promising anything anyone wants to anyone who asks, so you would have thought they would have hinted that independence would, in some way or another, be good for house prices. And the No side has almost more ammunition than it could ever need to explain why it is bad for mortgage credit and for prices across the board.

Several banks have now said that they will be moving their headquarters to the rUK. Analysts have suggested that “post-independence, the likely scenario is a large number of lenders withdrawing” from the market on the basis of cost.

Who wants to take on the burden of lending cross border with a different regulator and currency? Those who kept lending might find they have to raise their prices, partly to deal with higher administration costs and partly to reflect higher base rates in a new Scotland.

What might the overall effect be? Horrible, according to Zoopla.

House prices are a function of the supply of and demand for credit. The supply of credit could well fall significantly as banks cut back. But demand is likely to fall too.

“With the recent announcements by a number of large businesses and employers in Scotland of their intent to move south of the border following the referendum, a ‘Yes’ vote could increase supply of available properties while negatively impacting demand due to worker migration and result in a sharp fall in house prices.”

If Scotland loses a “significant part of its service economy” (something I look at in my editor’s letter this week) it is house prices that will see the most immediate effect.

How nasty might it be?

“Potentially catastrophic,” says Russell Quirk of eMoov.co.uk. With unemployment, repossessions, and downwards pressure on house prices as a result.

Back to Zoopla: “If the economic impact on Scotland is as severe as some recent market commentary has suggested, a ‘Yes’ vote could potentially create a market shock on a par with the recent financial crisis when house prices in Scotland fell by 17.5%. That would wipe over £31,000 off the value of the average Scottish home, and £85bn off the value of the total housing stock in Scotland.”

I wrote recently that I didn’t think my house in Scotland had been a very good investment. It might be about to turn out to be a very bad one.