April Monthly Feature
Scotland's Resilience
Last week brought the news that Scotland had reached the top of the UK. Not in geographical terms, where it has always been, but in terms of the unfamiliar territory of house prices, with Nationwide recording that the inflation rate in this sector in the past year was now 6.3 per cent, not only nearly treble the national average of 2.2 per cent but higher than London, which had seen its first quarter-on-quarter decline since 2005 to slip to 5.6 per cent.
Yet while Scotland and London have been the biggest regional boom markets in Great Britain in recent times (Northern Ireland's fortunes have been separately influenced by the peace dividend plus the southern Irish second home market and prices there are now declining), there is one key difference between the land north of Hadrian's Wall and that within the M25; price.
London, still by a distance the most expensive market, has seen its affordability dwindling in a way that Scotland's has not, since in the latter case the high inflation was starting from a low base. Nationwide's chief economist Fionnual Earley pinpointed this as a major factor, stating: "In the past we have alluded to the fact that mortgage affordability is not as stretched in Scotland as in other parts of the UK and this is likely to be the main factor behind the relative resilience of Scottish house prices." In London, meanwhile, affordability was "becoming particularly stretched for local first-time buyers". This is not something as likely to happen in Scotland, since prices are just 84 per cent of the UK average, Ms Earley noted.