Respected Scottish estate agency Rettie forecasts average house prices to rise by 3% in Scotland this year due to a slightly improving economic outlook.

Its transactions forecast for 2025 is to see a rise of 2%.

A statement from the agency says the housing market in Scotland and the wider UK has been adjusting to higher interest rates and mortgage rates dating back to autumn 2022, with the market largely stabilising in terms of average prices and transactions over 2024. 

Rising mortgage rates have dripped into the market as households have gradually come off their fixed mortgage deals, allowing them to time to adjust.

Interest rates are now starting to fall but the agency cautions that this is expected to happen slowly and having relatively high rates for longer will continue to act as a depressant on the market. Sales market recovery will therefore likely be slow. 

The rental sector has cooled in the main cities but there has been a significant weakening in availability and concerns that the demand/supply imbalance may worsen again over the next few years because of new taxation and legislative changes.

John Boyle, director of research and strategy at the agency, says: “As we forecast at the end of 2023, the Scottish housing market sailed along at a pretty slow and steady pace over 2024. There was little change in the key market metrics, which is a reasonably good outcome considering the headwinds of higher interest rates and a fairly anaemic economy. 

“The exception is the new build sales market, which has continued to come under pressure due to the additional supply-side pressures and regulatory changes it is facing. 

“The rental market has cooled after substantial growth in rents, but availability is becoming a more significant problem and could be exacerbated by forthcoming Scottish Government legislation.”