ALMOST £8 billion worth of Scottish property investment could be at risk after independence as London fund managers “sell down their Scottish assets”, an expert has warned.
David Hunter, a former head of Aberdeen Asset Management’s property business and ex-president of the British Property Federation, has claimed a Yes vote would have a “dramatic, negative impact” on commercial property values.
But the head of one of the country’s top developers, Macdonald Estates, insisted the sector will “flourish” outside the UK and could generate up to 5,000 jobs in the construction sector.
Dan Macdonald insisted that prime Scottish property would continue to be “very attractive to investment” worldwide. The investment chiefs made their claims in evidence to MSPs on Holyrood’s economy committee who are carrying out an inquiry into Scotland’s economic future post-2014.
Mr Hunter, now a director with various firms worldwide, warned that an independent Scotland’s bond yields – the rate it pays on interest – would be 1-2 per cent above the UK rate, meaning higher costs.
He added that the “fiscal, structural and currency barriers” would hit the Scottish economy and real estate values.
Scotland would fall into an “overseas” category for London insurance and pension funds, which would also drive up yields.
“These managers will naturally wish to sell down their Scottish assets and with few obvious replacement buyers, investment values will plummet,” said Mr Hunter.
“For the reasons I have given, I think it is easy to demonstrate why independence would have a dramatic negative impact on commercial property investment values.
“That this has not yet happened simply reflects optimism that independence will not happen and also a degree of ‘heads in the sand’ over the impact.”
But Mr Macdonald, whose firm is one of the biggest real estate developers in Scotland across a range of sectors, said it was a “misconception” that the property market north of the Border was “wholly dependent on the London financial sector” and may struggle after independence.
“Irrespective of independence issues or constitutional change, the Scottish market will continue to remain strong, as it has done traditionally,” he added.
“The reality is that wealth funds are vigorously investing now in a product whose life will take them a quarter of a century beyond the date of the referendum and into a place where they will operate in an independent Scotland.”
The property chief said that Westminster had done “nothing” to stimulate the property market outside London.
The relocation of government functions currently run from London back to Scotland after independence would also provide a “stimulus for further development and regeneration”, Mr Macdonald added.
This could lead to an annual rental income of £60 million and up to 5,000 jobs in construction.
Mr Macdonald added: “The commercial property market and the Scottish economy can flourish post-2014. However, this will only happen with a change of economic policy so that the focus is not only on London.”