Glasgow is unquestionably a wet city with an average rainfall of 46 inches a year. This compares to around 25 inches a year in Edinburgh and 23 inches a year in London. However by way of recompense to its population of around 600,000, Glasgow lies in the Clyde valley and is said to have the highest proportion of parkland to urban areas of any city in the UK. It is Scotland’s largest city, and has reinvented itself from an ageing industrial powerhouse, into a commercial centre with much investment coming from the financial and service sectors in recent years.
On the whole, Scotland has not seen the rises in property prices that other areas of the UK have experienced. It has been characterised by its stability, and even when the UK market crashed in the early 1990s, negative equity and falling values were not an issue. However, the Glasgow market is enjoying a period of real growth, and some of the rises being seen are as big as they have ever been. Competition for properties is fierce, and houses are selling for up to 40% over the asking price in many areas.
One of the most recent entrants in the Glasgow mortgage market is packager Solent Mortgage Services. The company’s Glasgow office went live in May last year, and has seen business levels from the area flourish. From a standing start, it is now recording business worth around £3m a month. Laura Cummings, general manager at Solent, believes there is a lot of growth still to come and refers to Solent’s Northern Irish operation. It was set up two years ago with a staff of one or two and now has eight or ten people, she says. Currently there are a total of four in the Glasgow office, with plans to take on more soon.
Cummings is acutely aware that the success of Solent in Scotland will lie in its ability to provide a high service standard for brokers, and will recruit staff to cater for the new business, rather than wait until it has come in through the door. She says: ‘The problem for us is to be able to grow, but maintain the service that we give. As an individual I like to react to something before it happens.’ To help with this, Solent is investing in its technology and hopes to be able to offer brokers online case tracking and acceptances in principle, although no timetable has been published.
Broker Moneyquest is another expanding operation, and is in the middle of reorganising its operations. Set up 14 years ago, the company now employs around 85 people and it is looking to merge its city centre and Bishopbriggs operations in the West George Street location, and leave 15 staff in its Edinburgh office.
Although the business is domiciled in Glasgow, little of its revenue comes from the area. Generating most of its business from the internet, Moneyquest does a lot of work for clients in the South East. This suits managing director Steve Pollard well and he is happy to be arranging the larger mortgages that the area produces. As he comments: ‘Only 10% of the UK population is in Scotland and the percentage is even smaller for the share of the mortgage market Scotland has because of the lower prices in the country.’ Moneyquest is not the only operation looking to take advantage of the larger market available outside Scotland.
One such company is Dunfermline Building Society. Set up in 1869, Dunfermline was traditionally an east coast operation, and now has 43 branches in Scotland, and in asset terms is in the top 15 of UK societies. Harry McGeough, senior manager key accounts at Dunfermline, says working with the likes of Moneyquest will help the society to spread its brand further out of the regions and into the UK as a whole. Dunfermline is already working with Your Move in the North East and Midlands areas, with further partnerships planned. While Dunfermline has no intention to overlook its own heartland in the central belt of Scotland, McGeough says it is increasingly important for it to have good relationships in place with national distribution providers that can give it a wider audience to play to.
As such a lot of work has been done with the sourcing systems to make sure the products are available and easily accessible to brokers across the UK. McGeough says this will be of increasing importance as regulation impacts. Although not worried about regulation, he says it will have an effect on the way intermediaries do their business and how they align themselves. As such, he feels it is imperative to make sure that whatever decision they make about the way they will do business under regulation, they can still access Dunfermline’s products. So not only is it key to be on the sourcing systems, but talks are underway with many of the clubs and networks as to getting on to their panels.
Although Dunfermline has steered away from offering products on a geographical basis, it does not yet offer buy to let in England, although this is under consideration. In Glasgow the buy-to-let market is in full swing, and there is more to come.
This is an area of the market where Nasim Malik, founder of Glasgow Financial Services, does a lot of work. For the professional property investor Glasgow has become a very attractive option, and many are investing in the numerous new-build projects that litter the city. With discounts of around 15% available from the building contractors, Malik says more and more landlords are buying 20 or 30 properties at a time, and then selling them off at a 10% mark up after the buildings have been completed. With there being a shortage of housing in Glasgow like many other areas in the country, demand is high for the properties, and the risk of being stuck with them comparatively low. Even if investors have to add these properties to their portfolios the rental market is also buoyant, and tenants can be found, whether it be from the professional or large student communities resident in the city.
Malik started the company five years ago, having found himself paying almost 30% for a secured loan on the back of poor advice. He felt other people may be in a similar situation and so began Glasgow Financial Services. The company is now doing around 500 cases a year. He has also seen a lot of growth come from the self-cert market, and believes borrowers should have more power in determining the amount of money they borrow.
The market has lost a little of its heat since last year, and more and more niche and sub-prime cases are being processed according to Craig Arthur, operations director at broker and packager Capital Mortgage Connections. Up until the first few months of the year, he says he had been seeing mostly prime business come in, but now there is less of it about, brokers are going back to the more complex cases. Although loan sizes have been on the increase, Arthur agrees that Glasgow and Scotland as a whole is a steady market and can sustain the jumps being made. In many ways he feels it is simply a case of Scotland catching up with the rises that have been seen elsewhere. Never before has the difference between property in Scotland and the rest of the UK been so large, and it is simply realigning itself.
Commenting on the strength of the market, Kingsley Bruce, partner at surveyors Speirs and Gumley, says: ‘We have certainly seen a very buoyant market and the past year was probably where things were going the strongest. This year the heat has perhaps come out of the market. Last year’s gains were probably bigger than the two years before put together and I cannot see things continuing at the same rate.’
Like any other city, Glasgow has its hot and not so hot spots with a wide variety in between. Bruce says: ‘Glasgow is very varied. The bottom of the market is bumbling along like it has done for many years with limited demand. However, in the West End of Glasgow there has been a spreading out and as it has become more expensive a lot of people, and particularly first-time buyers, can no longer afford to buy ‘ making areas around the West End more popular and expensive.’
Areas that have been affected include Thornwood, Anniesland, Whiteinch and Maryhill. The effect has not been localised to the west and north of the city, and south of the river similar trends are to be seen. Shawlands is a very popular part of south Glasgow, and surrounding areas like Cathcart, King’s Park, Mount Florida, and Hampden have all enjoyed piggy backing on its success. New-build projects have been very popular in these areas, and two bedroom apartments will sell for between £100,000 and £120,000 range. Over in the north side of the city in Anniesland this figure jumps to around £135,000 with somewhere in the heart of the West End selling for closer to £165,000.
New for old
While a lot of the development in Glasgow has come from new-build projects, there has also been a lot of conversion work. The Pinnacle building in the city centre used to be a commercial property before being made into apartments, while the old Post Office building in George Square has also been used in part to create flats. In the Merchant City there has also been many conversions, although some have priced themselves out of the market, according to Bruce. He says the conversions reflect a trend in the city that has seen more people look to live in the middle of town. Like Newcastle and indeed London, Glasgow has also seen a lot of redevelopment on its river front, and the old Clyde Port Authority building is being demolished to make way for flats, with others planned for the other side of the river. Again these are proving very popular, and attracting the professional investors mentioned earlier.
Glasgow, like other Scottish cities, has benefited from people relocating out of the bigger southern conurbations seeking a better lifestyle. Although not a small place, Glasgow can offer those looking to move into the area, either the option of a rural property within easy commuting of the city, or options in the hotel trade which Bruce says a number of people are turning to as they move away from the south. Glasgow is clearly a city on the up, and is now attracting an increasing number of visitors to it.
But they are not only coming simply to visit, but also to invest on a commercial level. Jim Wylie, business development manger for lender The Mortgage Business, comments: ‘Investment in the city has been dramatic over last few years and in fact Glasgow has recently seen an increase in call centres and is now home to some of the largest in the country. Also the development along the riverside in terms of commercial and residential properties runs into millions and this will continue for the next few years. With Glasgow having been awarded recognition with the City of Culture and City of Architecture awards, this has raised awareness of the city to the public as well as investors. Glasgow is a vibrant and cosmopolitan city which has seen a large increase in new enterprises setting up and has a very buoyant financial services economy.’ During the eighties, Glasgow advertised itself with the slogan: ‘Glasgow’s miles better.’ At first for those living there it seemed a little over the top, but not now. It has unquestionably pulled itself up by the scruff of the neck and offers those who live and work there all the advantages of a big city as well as an attractive lifestyle.
While the high street lenders are well represented in Glasgow, establishing an office in the city may not be the next step for many centralised players because the volumes and loan sizes in Scotland will simply not justify it. However, as the mortgage market develops, many are looking to partner with players already resident there to tap into the profits available. Mortgages plc is one such operation and although it has a processing operation in Glasgow, it leaves all the selling of its products to partners such as Dunfermline who package for it there.
While the weather in the city may be wet, the sun is clearly shining on the Clyde Valley housing market. The gains may not match those in the South East, but the associated risks are less and now the city has put itself on the investors’ map it seems unlikely it will slip off. The city’s weather may be wet, but at least it has a bright outlook and a sunny disposition to go with it.