The cost of housing in Edinburgh and Glasgow is set to rise above UK averages over the next five years, market analysis has revealed.
Figures published by property consultancy firm JLL forecast it will become more expensive to buy or rent a home in both Scottish cities.
JLL said by 2023 prices will rise in Edinburgh by 16.5 per cent and in Glasgow by 13.7 per cent. Across Scotland, there is expected to be more moderate growth of around 11.5 per cent, marginally outperforming the UK five-year forecast of 11.4 per cent.
House price growth in Scotland has increased 17 per cent in the past five years, below the growth of 31 per cent seen across the UK.
The firm said Scotland, like the rest of the UK, had under-delivered the number of homes needed to meet demand or to achieve the required targets.
The average sale price of a typical two-bed flat in Edinburgh’s city centre at the end of 2018 was £285,000 – a 2.5 per cent increase on the same period in 2017.
Price and rental growth in Edinburgh is expected to average 3.1 per cent per annum, well above the UK-wide forecast of 2.2 per cent price growth and 2.4 per cent rental growth. JLL said the Glasgow market has been characterised by an under-supply of housing for several years, particularly in the city centre.
This has been attributed to a shift in interest during 2017 from an almost entirely build-for-sale bias towards an emphasis on build-to-rent.
In Glasgow’s planning pipeline, JLL suggested there are around 4,000 build-to-rent units, many of which are set to be completed around 2021 and 2022.
The sale price of a typical new-build, two-bed flat in Glasgow city centre is around £226,000 – an increase of 1.8 per cent during 2018.
Over the next five years, JLL expects sales prices to rise by an average of 2.6 per cent. This is below that of many other UK city centres suffering from more acute demand-supply imbalances, but greater than the UK-wide and Scotland forecasts.
Rent costs in Glasgow are also set to grow by 3 per cent over the same period, JLL said.
The firm’s Jason Hogg said: “In recent years Scotland’s major cities have established themselves as stand-out performers in the residential market, with Edinburgh and to a lesser extent Glasgow seeing above average house price growth.
“This has been aided by the significant supply shortfall and growing demand from people wanting to live in city centres. The moderate growth across Scotland’s house prices are somewhat skewed by the above average performance of both Edinburgh and Glasgow, which are both set to see strong growth as limited development activity creates further discord between demand and supply.”