Scotland housing market: The country as a whole achieved a record high for average house prices

Describing something as being as safe as houses is a cliched if often accurate depiction of the housing market. There are few assets which are as solid as home ownership in terms of bringing in a real return over a prolonged period.

In Scotland house prices have remained remarkably positive over the last few years. By August of this year (the latest month for which there are official statistics) Scotland as a whole achieved a record high for average house prices.

This is at a time when most forecasters were predicting falls in values, doom and gloom as the cost-of-living crisis continued, the threat of recession, and soaring inflation made the prospect of an improving economy an unlikely outcome.

But here we are with average prices at a record high, interest rates static and likely to fall in the next 12 months, and a resilient and thriving Scottish housing market.

So where did it all go right? The main issue is that employment has remained remarkably high. There have also been large pay settlements on the back of high inflation, and a post-pandemic optimism which has placed a much greater importance on having the home you want in the right location.

The result has been large price increases in detached and semi-detached homes, with more inside space to work from home, and greater outdoor space to live and breathe, and all with great access to public and private transport options.

East Lothian now has the highest average price in Scotland at £336,885 just ahead of Edinburgh on £335,815 having risen by 11.39% in the last year alone. The average price of a detached home in East Lothian has risen by £76,638 in the 12 months to August 2023!

What is fascinating is that Scotland is the outlier in this as no other country of the UK has reached a record price high with the rest experiencing static or falling prices. The Scottish property market has remained remarkably resilient despite the negative headwinds impacting the other parts of the UK.

With the same factors impacting the whole of the UK there must be an explanation for the anomalous rises that have occurred in certain parts of Scotland. While both Glasgow and North Lanarkshire have reached a record high in average prices it should be noted that pricing, particularly in the latter, is at a much lower level than Edinburgh and the surrounding areas.

What is becoming clear is that average prices in Edinburgh and its surrounding areas are increasing at a much more rapid rate than the rest of Scotland. In a similar way that the house price boom which made Aberdeen and Aberdeenshire stand out from the rest of the country during the growth of the oil and gas industry we are currently seeing an enormous increase in interest in the capital.

These latest figures show that Edinburgh, East Lothian, West Lothian, and Fife have prices which are increasing ahead of other parts of Scotland which is likely to be due to the capital’s success as a destination to live and work.

Last year Time Out named Edinburgh as the most beautiful city in the world, its university is ranked in the top 30 universities in the world, it has the second wealthiest economy outside London, it has the largest number of Michelin restaurants pro rata outside London, and the largest arts festival in the world. It combines culture, finance, green spaces, historic and modern living, and good transport links across the UK and the world to make it appeal to a broad range of people.

This has resulted in a combination of buyers from within Edinburgh, across Scotland, throughout the UK, coupled with major international property seekers and investors to ensure that future price increases are inevitable. This is a separate market from the rest of Scotland and prices are clearly now racing away from other cities and areas in the country.

David Alexander is CEO of DJ Alexander Ltd