Hello and welcome to your first quarterly property review of the year from your friends at Edinburgh Self Storage. If you’re reading this because you are or you’re about to be on the move, we can help take some of the stress out of it with our personal storage deals.
And so to business and our predictions for the Scottish property market in 2025 – more of a preview than a review!
Scottish property market in 2025
Broadly speaking, the emerging picture is of a steady market, and what’s perhaps best described as a cautious price growth of around 2-3%. Availability of stock to buyers is expected to be strong, with home reports perhaps being an even more accurate gauge of what the property will sell for in 2025. The exception to the rule being exceptional areas.
We all want to get the sale done and dusted so you’ll be pleased to hear that selling times should remain at about three to six weeks. You might also see more favourable borrowing conditions from lenders because of increased competition.
The increase in properties coming to the market in 2024 was matched by a proportional rise in sales, and buyer demand is expected to stay strong in 2025.
Mortgage rates and affordability
Perhaps you were one of those who got caught up in renewing your mortgage in the wake of the 2022 mini-budget and got locked into deals with higher interest rates. Many of these will expire in 2025, which is welcome news.
What about housing affordability in Scotland in 2025?
Housing affordability is set to improve, compared to 2024. Mortgage rates are likely to range between 4% and 5% in 2025. While further Bank of England interest rate cuts are expected, global market indicators suggest we’re unlikely to return to the ultra-low mortgage rates of 2020. Instead, rates of around 4% might be more like the new normal.
Likewise, a probable outcome of the mortgage market in the second half of 2025 is the remortgaging cycle of those who bought during COVID’s ‘race for space’ in 2020. A raft of these fixed-rate terms will expire, creating an increase in remortgaging activity lasting until late 2025 and into 2026.
Premium buyers paying over Home Report valuations have stuck at an average of 2% in Scotland, but finding and affording rental properties is becoming increasingly difficult. With mortgage affordability improving and lower premiums over Home Report valuations, it might also be that a greater number of renters take the leap into homeownership.
First-time buyers
What about the profile of first-time buyers? It seems to have shifted quite considerably in the past few years when we look at the UK as a whole. The average first-time buyer age is now 34 (compared to 29 a generation ago), and affordability challenges remain. The stamp duty holiday for first-time buyers ends in March 2025, reducing the 0% threshold from £425,000 to £300,000. Perhaps we’ll see a flurry of transactions to beat the deadline?
First-time buyers increasingly rely on hand-outs from parents – roughly about 40% of purchases – and the average parental gift stands at £25,000. But home ownership remains out of reach for many, with some 4 million UK adults now living with parents. This marks a 15% rise since 2011.
Additional Dwelling Supplement (ADS) and the rental market
The Additional Dwelling Supplement (ADS) rose from 6% to 8% in December of 2024, impacting buy-to-let investors big time. A private buyer in Scotland now faces an ADS of £16,000 on a £200,000 property. The Scottish Government is also expected to introduce rent controls by mid-2025.
These measures will likely deter new landlords, reduce rental stock, and hike rents. However, first-time buyers could benefit, as more former rental properties enter the market for purchase.
New builds
The new build market has been in the doldrums but 2025 looks to bring a glimmer of hope UK-wide. Developers are expecting more active sites and greater stock availability, and a stronger new-build sector provides buyers with greater choice too, steadying the property market overall.
Unfortunately, demand continues to outweigh supply. The UK population is forecast to reach 73 million by 2036, up from 63 million in 2011. This, combined with an ageing population, places pressure on housing availability.
Government reforms to the planning system could support new developments, but challenges remain. A shortage of skilled construction workers could hinder progress, the knock-on effect being delays in delivering new homes.
Buy-to-let and private rental
Scotland has already seen significant private rental sector reforms and there’s been a 6% drop in landlords while rental property availability has grown by 3% since 2020. This suggests consolidation of existing portfolios rather than exiting the market entirely.
With proposed reforms in England on the way, the buy-to-let and private rental sectors only look set to get more layered with complexity.
Sustainability and the property market
New-build homes are the most energy-efficient, with EPC ratings of A or B. These homes are well-insulated and cheaper to run, a trend that will continue as the Future Homes Standard is implemented.
Retrofitting older homes may have had limited uptake but interest in solar panels is growing, particularly among electric vehicle owners. EV adoption often sparks broader interest in home sustainability, so we might see this as an emerging trend in 2025.
Will the property market crash in 2025?
Geopolitical risks can always bring volatility, but most analysts seem to concur that the outlook for 2025 is largely upbeat. So there’s no crash on the cards.
What’s the long-term forecast?
Savills forecasts UK property prices will climb by 3.5% in 2025 and a cumulative rise of 21.6% over the next five years. JLL predicts a 20% increase by 2029. These projections are based on three key assumptions:
- Interest rate decline
- Inflation stabilises
- Housing supply shortages persist
We’re no Mystic Meg but property still looks like a strong investment for wise-owl buyers.
Sources:
coultersproperty.co.uk
mov8realestate.com
lloydsbankinggroup.com
