Rettie has raised its 2024 Scottish house price forecast from 1.5% to 3%, adjusting its predictions following a reduction in the base rate.
The property firm noted that, while the UK monetary policy brought a sense of stability, the overall housing market in Scotland remained ‘tepid.’
Rettie also lowered its house price forecast for 2025 from +4% to +3%, noting that the rate of economic growth may slow again next year.
Dr John Boyle, head of research at Rettie, said: “With the Bank of England deciding to keep interest rates at 5%, following the quarter point reduction in August, there is a greater sense of stability in the market and market rate cuts are reducing costs for consumers.
“However, Scotland’s housing market performance is still best described as ‘tepid,’ a lukewarm showing as the market continues to adjust to higher interest and mortgage rates that kicked in during Autumn 2022.”
Boyle added, “In subsequent years, we think that growth will move back closer to a longer term trend of around a 4 per cent annual increase if the economy recovers as anticipated.”
The number of residential property transactions was around 93,000 in 2023.
Rettie expected a modest increase this year, aiming for a gradual move towards a longer-term trend of around 100,000 sales per year.
However, this figure was still far from the market peak in 2007, when Scotland achieved more than 150,000 house sales.
In the Scottish rental market, the number of new listings continues to decline, indicating a demand/supply imbalance.
Although rent increases were cooling in Scotland’s main cities, this followed substantial rises from the rent freeze that was announced two years ago.
Boyle expressed concerns regarding proposed rent controls in the Housing Bill currently being discussed in the Scottish Parliament, saying that it could worsen the housing crisis.
He said: “The rental market remains buoyant in terms of demand but there are real concerns about the direction of Government legislation.
In the Build-to-Rent (BTR) market, Rettie highlighted worries that the Housing Bill could deter future investment.
Boyle added: “Unfortunately, there has been very minimal levels of BTR investment in Scotland since the rent freeze was put in place even though it has now been lifted.
“The possibility of the introduction of another stringent system of rent controls is deterring pension funds from investing in Scotland’s housing.”
