The Scottish housing market continues to experience a low-key recovery, reflecting the overhanging effects of earlier cost-of-living pressures and higher mortgages rates on household budgets. Prices in September picked up by a modest £400 (0.2%) compared with August. Even so the increase took average prices above £226,600 for the first time, meaning that Scotland hit a new market peak for the fifth time this year.
Although this is a limited recovery to date, with prices up by only 2-3% on a year-on-year basis in recent months, it follows the mildest of downturns and this has meant that only small price increases have generated this run of fresh market highs.
Market conditions across Scotland were relatively subdued in September, with local price movements finely balanced. Fourteen local authority areas recorded rising prices in the month whilst eighteen saw price falls – one of the weaker performances this year.
Prices in four local authorities hit new market highs, including two of the most expensive areas – East Lothian and East Renfrewshire. Highland and Renfrewshire also came within touching distance of prices which would represent new record highs.
Monthly volatilities aside, as can be seen from the heat map, local authorities reporting stronger prices than a year ago continue to outnumber those reporting a fall by 2:1. This very much continues the positive monthly pattern we have seen since March.
Among the “risers”, eight reported price increases of at least 5% over the year. At the other end of the spectrum, the biggest “fallers” year-on-year come from one of the lowest-prices authorities - Na h-Eileanan Siar (formerly Western Isles) – and one of the most expensive – East Dunbartonshire.
There is still some uncertainty around the final numbers for August and September, with property sales for the two months not yet fully logged by Registers of Scotland. That said, it is already clear that August marked the strongest month not just for the year so far but over the past two years. Perhaps inevitably after such a strong showing in that month, September looks to have been a quieter month and some way below a year ago.
Sales activity has outpaced that of a year earlier in six of the nine months so far this year and for the year to date cumulative sales are tracking 3-4% above the same period of 2023 – more activity reflects higher demand and that typically translates into higher prices. Meanwhile, and as has been the case for some while, sales in the capital and sales of properties worth more than £750,000 (that is, subject to the highest rates of LBTT) continue to be comfortably ahead of their corresponding 2023 numbers.
It is worth noting that newbuild completions while picking up slightly in the second quarter are still well down on recent years and this underpins continuing concerns about housing supply in Scotland. A Housing Investment Task force was put in place by the Government in April 2024 to report by March 2025. It is charged with looking at how to boost supply and, given Budget constraints, how to increase the flow of private investment into housing. Separately the David Hume Institute - an independent think tank - has begun an inquiry into the Scottish housing system aimed at a fundamental rethink on how it is operates.
However, neither of these will have any short term impact. The Scottish government has reduced its spending on affordable housing reflecting budgetary pressures. There will be some relief therefore that the recent UK Budget saw the Scottish settlement boosted by £3.4 billion via the Barnett formula for 2025/26 though this was mainly earmarked for health and education with only £610 million for capital investment.
Taken in the round it might suggest that in the medium to long term housing supply in Scotland will recover and thus further help limit housing pressures though of course much will turn on the macro-economic context, and not least in terms of interest rates.
Scott Jack, Regional Development Director at Walker Fraser Steele, comments:
“Our data shows this month that average house prices in September grew by a modest £400 (0.2%) compared with August. The increase took average prices above £226,600 for the first time, meaning that Scotland’s housing market hit a new peak for the fifth time this year.
“Notwithstanding the improving backdrop of the cost of living, the Scottish market appears subdued in September, with fourteen local authority areas reporting rising prices in the month whilst eighteen saw price falls.
“This is a limited and bumpy recovery to date, with prices up by only 2-3% on a year-on-year basis in recent months. The data does not yet reflect any impacts on buyer and seller confidence from the budget, which will become evident over the coming months and it will be interesting to see if mortgage pricing continues to harden as swap rates have risen.
“The Bank of England Base Rate cut was helpful for affordability and will doubtless ease some home owners’ payments but it is unlikely to provide a significant boost to home buyers.”
