How much has the average house price increased in Scotland since the start of the pandemic? A whopping 27.4%! This increase, according to data released by DJ Alexander Ltd, Scotland’s largest estate and letting agents, underscores the robust performance of the Scottish property market over the past three years.
The 27% increase in house prices is a stark departure from trends observed in the previous 40-month period, during which prices only rose by an average of 8.9%. It’s clear that the market has reacted significantly to global events, but what causes this surge?
Decoding the Surge: Acceleration and Slowdown in One Frame
Media reports might make you think that house price growth in Scotland has been slowing down. But, according to David Alexander, the CEO of DJ Alexander Ltd, this is not exactly the case.
He explains, “These figures show that, despite media worries about a slowdown, this is mainly because house prices have grown at such an incredible rate since the pandemic began.” Essentially, even if mortgage interest rates stayed static, some cooling in price growth is inevitable after such a rapid incline.
A Patchy Picture: Uneven Growth Across Scotland
The increase in Scottish house prices hasn’t been consistent across all regions of the country. In particular, the cities of Edinburgh and Glasgow have outpaced the rest of the Scotland in terms of price growth.
Edinburgh saw its average price growth slightly lower at 21.4% from March 2020 to July 2023. Surprisingly, this is still higher than the 21.9% growth recorded in the 40 months leading up to the pandemic (December 2016 to March 2020).
On the other hand, Glasgow holds the record for the highest growth in any Scottish city during the same period. Here, average prices have jumped by an eye-popping 33.5%, compared with a modest 14.2% rise in the 40 months leading to March 2020.
The Edinburgh Effect: Ripples Beyond the City
What’s particularly fascinating is the impact that the booming Edinburgh market has had on the surrounding areas. As more and more people aspire for a rural living with easy city commuting, a ‘ripple effect’ is pushing up prices in East Lothian, Fife and West Lothian. East Lothian, in fact, has seen house prices skyrocket by nearly 60% in just three and a half years.
What Lies Ahead: Affordability May Soon Curb Growth
While the price growth is good news for potential investors, long-term sustainability is a concern. As David Alexander observes, “At some point, affordability issues will start to regulate this growth, as prices are already significantly higher than a few years ago.”
This doesn’t imply a crash is looming, however. High employment levels paired with moderated interest rates have allowed many homeowners to still buy their dream homes. The expectation, in the long term, is a gradual stabilization of prices and a return to lower annual increases. Even so, Alexander cautions that we may not be at that point just yet and highlights that parts of Scotland remain extremely popular for prospective buyers.