© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
August 1, 2014 4:05 pm
Buy a nice flat in central London and you will be lucky to see any change from £2m. Buy one in Edinburgh’s gorgeous Georgian New Town and you will find it hard to spend more than £650,000 – and that’s with super high ceilings and views across the Firth to Fife.
The most expensive one I can find this week is in one of the city’s best addresses – Ainslie Place. At 214 sq metres, it has five bedrooms and could be yours for £645,000. Move further north and a glorious mansion overlooking the Tay in Dundee is available for £600,000 – less than it would cost to build today.
Go west to Argyll and you can purchase The Long House, a new build once featured on Grand Designs and notable for its heart-stopping views across Loch Long. It is yours for £375,000; it cost £380,000 to build. The land around it effectively comes for free.
Scotland, says Andrew Perratt of Savills, has “never been cheaper relative to the rest of the UK”. This hasn’t gone unnoticed. The most highly-searched word on the Savills website at the moment is, as usual, London. But the second is Scotland and the third Edinburgh. The firm has seen a 100 per cent rise in London buyers registering in the Scottish market in a year and, until a month or two ago, every good flat on the market went to sealed bids.
That’s just changed. Londoners appear to have belatedly noticed that Scotland comes with political risk. In 47 days we go to the polls and, while we probably won’t, Scots just might vote to secede from the UK. That, say the agents, is making buyers back off. I’m told the same thing about estate buyers within Scotland. They’re looking but they aren’t buying. You can see why. The talk around independence doesn’t pander much to the wealthy. There’s much talk of a new Scotland having better values than the rest of the UK – being more equal and fair. There’s talk of progressive taxes, of land redistribution and of those with the broadest shoulders giving more. Look at the propaganda and if you were to think that your shoulders looked remotely broad you’d want to keep your wallet in your pocket.
But to look at it like this is to entirely miss the point. Why? Because in the residential, commercial and agricultural sectors, the Scottish government already has the powers to do most of the things you might be nervous about. Let’s start with stamp duty. It has gone oddly unnoticed, but Scotland will set its own rates next year. The new tax will be known as the Land and Building Transactions Tax, and it isn’t going to come cheap at the top end: the proposals suggest that anyone buying at over £1.5m can expect to see their bill rise from 7 per cent of the value of the house to more like 10 per cent. Next, look at some of the legislation making its way through the Scottish Parliament, such as the Community Empowerment (Scotland) Bill, introduced in June, which will make most landowners want to head for the border. There’s an extension of Community Right to Buy, whereby communities can register an interest and get first refusal on a sale, to practically all land, urban or rural (it was restricted to mainly rural land). That’s not particularly contentious – willing sellers aren’t bothered who their buyer is. But there’s a whole new area of Community Right to Buy as well – the Register of Community Interests in Abandoned or Neglected Land. This comes with what Edinburgh lawyers Turcan Connell call an “alarming” aspect. “There is no requirement for the seller to be willing to sell,” they say. Instead, a sale can be forced if the land is “wholly or mainly abandoned or neglected”. Then there is the issue of the absolute right to buy (ARTB) of long-term tenant farmers. At the moment they too have effective first refusal on their farms, but they want to be able to buy even if the freeholder doesn’t want to sell – as Scotland’s crofters already can. There is an expectation that they will soon get what they want.
Then look to the thing really making waves in the market, the report just out from the Land Reform Review Group, “The Land of Scotland and the Common Good”, which will result in a Land Reform Bill in 2015. There are overlaps here with other bills and reports, but the idea is to create a new model of land ownership, one that references “wellbeing”, “sustainability,” a “greater diversity of land ownership”, “social justice” and the like. How? Streamlining of compulsory purchases so that they are used more often in the public interest; changes to the law of succession to make it harder to leave whole farms – or anything else – to just one heir; community ARTB; more secure residential tenancy rights; an upper limit to the amount of land any one owner can hold (yes, really); the removal of the exemption to non-domestic rates for agriculture and forestry; the introduction of an annual land tax; a system that “strongly encourages” owners to put land to best use; the “modernisation” of access rights to rivers; and a “range of measures” to ensure that 1m acres of land are in community ownership by 2020. You can make most of this sound just fine if you take it clause by clause. Take compulsory purchase. Andy Wightman, author of The Poor Had No Lawyers, points out, for example, that no one wants to live by neglected urban land. It follows then, he says, that there can be no reasonable objection to a careful state forcing its sale and better use.
There’s an extension of Community Right to Buy . . . [on] practically all land, urban or rural
But look a little closer. This represents a change in broad policy: from a focus on expanding the number of people who have access to land to one on expanding the number of people or communities who own land. And it comes with some slippery definitions. What is neglected land? One man’s abandoned land could be another man’s wild flower meadow. And who is the community? That might seem an obvious question, but look to North Uist, where three councillors recently decided it would be a good idea to do a feasibility study for a buyout of the local estate. There was no willing seller, and of the 70 people who turned up to a public meeting only six voted for the study. The councillors decided to press on with a postal ballot anyway. Are the councillors the community? Are the people who attempted to vote them down the community? Then look to the security of the land – what if a landowner subject to a purchase order has borrowed against it? How might a risk-raising law such as this affect the lending practices of banks? If I could see that the law could make my borrower a forced seller, my interest rates might rise a bit. The issue is fraught with the uncertainty of unintended consequences.
Still, add up all the clauses in all the reviews out at the moment, says legal firm Gillespie MacAndrew, and you can be certain of one thing: there will be reform, and it will “impose a far greater degree of public involvement in and control over land ownership, together with substantially increased visibility of the use made of that land”.
The Scottish government already has the powers to do most of the things you might be nervous about
You might approve. You might be horrified that Wightman’s research suggests that 432 people own 50 per cent of rural Scotland, and you might feel that the nature of land is such that it can never be a wholly private possession. You might think that farmers are grotesquely oversubsidised at the moment. You might also note that Scottish landowners are used to the idea that what is theirs is not all theirs: right to roam has already taken their privacy and they no longer really control long-term tenanted land. The direction of travel has long been clear – the new bills and reviews just mark a step up in the speed of the transfer of power from landowner to perceived public interest. Whichever side you choose to take, this all matters – for the Scottish economy, for confidence in the sanctity of property rights and for social cohesion. But it has nothing whatsoever to do with the independence vote. It’s going to happen anyway.
Merryn Somerset Webb is editor-in-chief of MoneyWeek, @merrynsw
Illustration by Toby Whitebread
Letter in response to this article:
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.