Scotland’s vibrant housing market leads the way in UK

The last year has been an extraordinary one for the property market. While many pundits predicted depressed prices due to high interest rates and economic uncertainty the people of Scotland continued their enthusiasm for home ownership and produced the most vibrant and dynamic house buying market in the UK.

In Scotland average house prices across the nine months to September (the latest month for which there is data) show an increase of 6.2 per cent compared to 4.7 per cent in England and Wales. In Edinburgh and Glasgow, the price increases were even more spectacular rising by 11.7 per cent and 9.3 per cent respectively, resulting in an extraordinary year for homebuyers.

This house purchase activity has led to bumper revenues for the Scottish Government through the Land and Buildings Transaction Tax (LBTT) which will raise two-thirds of a billion pounds from homebuyers in Scotland in 2024.

Demand in the private rented sector (PRS) continued at record levels during the last year with far too many renters and not enough properties. The result has seen rents rise at above average rates largely driven by uncertainty over rent caps in the Housing Scotland Bill and a continued lack of direction on the direction the sector is going.

The official statistics have shown rents rising at record rates since rent caps were introduced in September 2022 while this has also resulted in investment being limited until there is a clear idea of where the market will be in the next five years. The proposals for rent caps in specific zones remain in the Housing Scotland Bill which had its first reading in December, despite this having resulted in higher rents for tenants, greater demand, and fewer properties coming on the market. Until this issue is resolved and removed from the legislation then I fear we will continue with the current uncertainty and rising rents in the coming years.

With housing emergencies having now been declared in 13 councils across Scotland it is clear that we are no further forward over the last 12 months in resolving this issue. If anything, the situation has got worse.

The fall in 2024 in the number of newbuild housing starts across all sectors should raise alarm bells at every level of government and among all aspects of the housing market. Without many more houses being built to sell to homeowners, to be sold to the private rented sector, and to address the serious shortages in social housing it is impossible to see how the current national emergency will be addressed.

The current obsession with expensive, and complex heating systems being introduced without the workforce to enable this has meant that the cost of newbuilds keeps rising, the timescales are extended, and the capacity to address the housing needs of tens of thousands of Scots remains unresolved. This was another unresolved issue of 2024 which needs to be looked at in the coming year.

Delaying the introduction of greener heating systems whilst introducing appropriate training schemes would remove a serious blockage in the number of newbuilds being started and give the housebuilding sector essential breathing space to build.

The last year has once again shown that the housing sector cannot work in isolation. Any solution to the current housing emergency requires a broad-based approach which engages with all parts of the market and sees housebuilders, the private rented sector, and social housing as part of a cohesive whole approach.