The mainstream market in Scotland primarily consists of local buyers and as such has been less affected by the uncertainty surrounding the Independence Referendum. House purchase activity across Scotland remains robust, particularly in urban locations. There was a 23% increase in transactions, from 74,494 during the year ending June 2013 to 91,870 during the year ending June 2014. This was led by a 21% increase in mortgage lending over the same period (see Graph 2 below). The rise in mortgages has mainly been driven by the Funding for Lending scheme which has made a positive contribution to mortgage availability across the UK.

At a Local Authority level, we are seeing continued strong performance in the core markets of Aberdeen and Edinburgh, the commuter locations of East Lothian, East Renfrewshire and East Dunbartonshire and also secondary markets including Angus and Midlothian. Overall values in Scotland showed strong growth during 2014. According to data from the Nationwide Building Society, the average Scottish house price increased annually by 5.4% during the second quarter of 2014. We are forecasting Scottish mainstream values to rise by 6.5% at the end of this year.

Such growth is likely to be driven by activity in urban areas. However, our forecasts over the next four years take into account the potential impact of interest rate rises on housing costs in Scotland. Affordability constraints are likely to increase over the five-year period of our forecasts thus limiting the capacity for strong price growth. The pattern of price growth will be dictated by the extent of growth while rates remain low and, in turn, how quickly those rates rise.

CLICK Graph 2 BELOW TO ENLARGE

Taken from
Spotlight: Scotland has voted 'No'