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Why is the Scottish housing market doing so well?

David J Alexander
The sector is consistently outperforming equivalent in England and Wales right now​… but why?

The Scottish housing market continues to soar ahead as average prices rise, volumes remain strong, and most of Scotland sees substantial growth. You would assume things would be broadly similar across the UK, with peaks and troughs depending on popular and less popular areas. However, almost all of Scotland is outperforming England and Wales with average prices increasing by 2.9 per cent over the last year compared to a rise of 1.6 per cent south of the Border.

The average house price in Scotland is now £192,488, an increase of £5,368 over the year, with six areas recording over £10,000 rises and just four experiencing price falls. There were substantial variations in annual price rises, with Midlothian recording the highest increase of £17,724; Edinburgh rising by £14,315; Stirling up £13,927; West Lothian higher by £11,276; and North Lanarkshire up by £10,506.

The four areas which experienced falls in value last year were Perth and Kinross where average prices dropped by £4,334; Argyll and Bute down £3,862; Aberdeen fell £1,794; while Dumfries and Galloway dropped by £602.

This shows that the Scottish housing market continues to be remarkably resilient. An increase of £5,368 equates to a 2.9 per cent rise over the year at a time when interest rates remain high and there is continued concern over the performance of the economy. In England and Wales, the percentage increase is almost half that figure at 1.6 per cent.

Other data shows that sales volumes in Scotland between May 2023 and April 2024 (the latest period for which there are statistics) are almost static, starting at 7,671 and ending the year with a fall of just 25 to reach 7,646. Whereas in England and Wales sales volumes have plummeted dropping 22,120 from 45,476 to23,356.

It is curious that, all things being equal, Scotland is performing substantially differently from our neighbours south of the Border. It is a bit of an anomaly that personal and property taxes are higher here, yet demand remains resilient and consequently prices continue to rise. However, this may not continue and needs to be monitored to see if our higher taxes impact on the housing market in the future.

A lot of the growth remains in our major cities and their surrounding areas producing high demand and rising prices. People are still drawn to live and work in or near Edinburgh, Glasgow, and the Central Belt in general. The price fallers are once again in rural areas such as Argyll and Bute, Dumfries and Galloway, and Perth and Kinross, with Aberdeen the notable exception due to its high backlog of properties for sale.

Despite the naysayers and the doommongers, the Scottish market continues to be strong and outperform the rest of the UK. Given that sales volumes remain constant in Scotland there is no reason prices won’t continue to rise. A strong level of demand will always result in a strong housing market with robust prices.

Whether this continues remains to be seen and will be affected by outside influences. But with interest rates likely to fall in the coming months, employment remaining high, and better than expected economic growth I believe these increases in Scottish house prices are likely to continue in the coming year.

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