Investors are holding off cautiously, but it’s not all bad news. Rental and letting prospects look set to improve…
The continuing uncertainty over Scotland’s political future post-referendum – and as we approach the finalisation of the Scotland Bill 2015/16 – is having a negative effect on the Scottish property investment market and is, in turn, dampening transactional activity.
That’s according to Ryden’s 77th Scottish Property Review, which says the cautious sentiment looks set to continue as investors monitor wider political developments and until other issues, such as the potential UK Brexit scenario, are resolved.
It says prime investments will always attract strong demand but the definition of what constitutes ‘prime’ will remain narrow and the fall-off in demand and pricing for secondary assets will continue to be more severe than usual.
“The Scottish market offers strong performance opportunities for investors with the benefit of a clear head and a good understanding of the market, as well as the ability to look beyond the immediate uncertainties”
According to Ryden, the absence of speculative development in the office and industrial sectors throughout the central belt, combined with the reduction in prime supply, will inevitably lead to improved rental and letting prospects for existing and refurbished stock.
An added bonus for investors in these markets is that these opportunities are available at attractive yields and capital values – both historically and in comparison to similar regional centres south of the border.
Pricing on secondary assets remains quite volatile and the convergence of short income pricing and alternative use values for student accommodation, residential and private rental sector (PRS) should continue to stimulate change of use in a number of these situations.
Ryden says that now – and more so than ever – the Scottish market offers strong performance opportunities for investors with the benefit of a clear head and a good understanding of the market, as well as the ability to look beyond the immediate uncertainties.