Leading Scottish property firm Rettie & Co. has significantly revised its average house price growth forecast for Scotland in 2026, lowering expectations from an initial 3.5 per cent. The firm attributes this adjustment to ongoing geopolitical events, rising inflationary pressures, and the potential for increased interest rates.
While the recent signing of a peace deal between the United States and Iran offers some optimism for stabilising inflation and interest rate trajectories, Rettie anticipates that subdued house price conditions will persist as the most likely scenario for the remainder of the year.
The Scottish housing market saw approximately 3 per cent average price growth in 2025. However, the first four months of 2026 recorded a more modest 1.1 per cent increase in average house prices compared to the same period last year, with transaction volumes rising by just under 1 per cent. The renewed conflict in the Middle East is cited as having impacted the traditionally busy spring period, an effect expected to be felt throughout the year, even with de-escalation.
Dr John Boyle, Director of Research and Strategy at Rettie, commented on the shift:
“We forecast at the start of 2026 that the Scottish housing market would continue to move at a steady pace this year, with modest uplifts in the key market metrics. However, this was before renewed conflict in the Middle East, which is causing global inflationary pressures and related mortgage rate rises.”
Dr Boyle further elaborated on the potential impact of monetary policy:
“Rising interest rates will subdue housing market activity and the extent to which they do this will depend on how far and fast rates rise, and that is a ‘known unknown’ for now.”
Nevertheless, he noted the tempering effect of diplomatic developments: “Current expectations are that such rises will be limited, particularly with the recent signing of the US-Iran peace deal, and what we could now see are flatter housing market conditions.”
Rettie’s initial forecast for residential property transactions in 2026 projected a 2 per cent increase. While the first four months of the year recorded transaction numbers similar to the corresponding period last year, broader economic forecasts suggest a likely downturn in these figures over the year. The new-build sector experienced a 15 per cent year-on-year increase in transactions during the first quarter, though market activity remains historically low due to persistent challenges with rising costs and land availability.
In the Scottish rental market, rents have shown signs of stabilisation following the passage of the Housing (Scotland) Bill in 2025. This legislation has contributed to an increase in rental listings, which in turn has moderated the pace of rent increases. The average advertised rent in Scotland stood at just under £1,200 per calendar month in the first quarter of 2026.
Dr John Boyle observed: “The average advertised rent in Scotland rose sharply following the Covid-19 pandemic but has stabilised in recent years.”
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He attributed this partly to “the affordability ceiling in the market, with minimal real wage growth in recent times, but is also partly due to an easing in mortgage lending and rates which has encouraged more people into home ownership and reduced demand levels in the rental market.”
Additionally, Dr Boyle noted that “The passing of the Housing (Scotland) Bill in 2025 has also settled the market after a couple of years of political interventions that created significant market uncertainty and dislocation.”
Notably, rental supply in Scotland’s major cities has rebounded more substantially. Glasgow’s rental stock has achieved a full recovery after significant reductions between 2021 and 2024, exhibiting a more robust rental market compared to Edinburgh. This resurgence is partly supported by the introduction of new Build to Rent (BTR) developments, such as Candleriggs Square.
