Scottish property market is still defying expectations

Over the last year the Scottish property market has continued to defy expectations and see prices rise at a faster rate than our counterparts south of the border. In Scotland average house prices for the nine months to September 2025 (the latest month for which there is data) show an increase of 4.5 per cent compared to 1.7 per cent in England and Wales. While this is a slower rate of growth than in the previous 12 months it is still a robust increase in these challenging times.

This house purchase activity has led to bumper revenues for the Scottish Government through the Land and Buildings Transaction Tax (LBTT) which has risen by £118.8m to reach £747.5m – an increase of 18.9 per cent on the same period in the previous year.

Whilst the housing sector for homebuyers has remained strong this has, in part, been due to a continued reduction in activity in the housebuilding sector. The number of all sector newbuild starts in Scotland between 2023/24 and 2024/25 fell by 1,478 (-8.9 per cent) from 16,582 to 15,104 which is the lowest 12-month figure since 2012/13. Astonishingly, these numbers are respectively 4,327 and 5,838 lower than the pandemic years of 2020/21 and 2021/22.

Not enough is being done to address the needs of homeowners and tenants and building more homes has to be a priority if the housing emergency is to be addressed. We need thousands more houses to be built for homebuyers, and to be sold to the private rented sector, and to address the serious shortages in social housing.

Demand in the private rented sector (PRS) has stabilised over the last year following the ending of rent controls and the return of the free market. The most recent quarterly statistics show that average rents for two-bedroom properties (the most common size of property) rose by 3.1 per cent in the 12 months to September 2025 matching the annual rate of inflation. One-bedroom properties rose by 4.0 per cent; three-bedroom properties were up 1.6 per cent; and four-bedroom properties were down 1.5 per cent.

Between 2010 and 2025 just four areas of Scotland had rent at or above the cumulative inflation rate of 54.7 per cent while the remaining 14 areas all saw rents fall in real terms over the 15-year period. Average rents across Scotland as a whole rose 67 per cent over the 15 years which is only 12 per cent above the inflation rate or less than 1 per cent per year.

Given that the Housing Scotland Act is now law and contains proposals to introduce rent controls if councils identify an issue with rising prices these figures should reassure the government that the market, if left to itself, is effective. Rents rise and fall depending on demand and, given the recent negative experience of rent controls and their impact on prices, it would be wise to leave well alone for the benefit of landlords and tenants in the future.

Over the last year the housing sector has shown a remarkable resilience for homebuyers and for tenants with prices reflecting changes in supply and demand. Lower housebuilding has resulted in higher prices for buyers while an end to rent controls and greater supply means falling rent rises. The lessons of the last year show that less interference and a greater understanding of market freedoms produce better results for everybody.