Middle East conflict likely to hammer Scottish house price growth in 2026

Upmarket estate agency and property consultancy Rettie said its original forecast of 3.5 per cent average growth for 2026 was now under review. Last year, average house price growth north of the Border was about 3 per cent, which the firm said could now be a “stiff target” for the current year.

Across the first four months of 2026, average house price growth was 1.1 per cent compared with the same quarter last year, with transactions up by just under 1 per cent over the same period. However, the Iran conflict has hit the usual busy spring period and that will be felt as the year progresses even if the conflict eventually de-escalates, Rettie noted.

John Boyle, the firm’s director of research and strategy, said: “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.

“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. 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 original forecast for residential property transactions in 2026 was an increase of 2 per cent, and while a similar number of transactions was recorded in the first four months of 2026, year on year, the likelihood according to Rettie is that the figures will turn down a little over the course of the year given wider economic forecasts.

New-build transactions increased 15 per cent year-on-year in the first quarter of 2026, although market activity remains low in historical terms as the sector continues to struggle with rising costs and land opportunities.

In the Scottish rental market, rents have stabilised after the Housing (Scotland) Bill was passed last year, leading to increasing rental listings which have moderated rent increases, the firm noted. The average advertised rent in Scotland averaged just under £1,200 per calendar month in the first quarter of 2026.

Boyle added: “The average advertised rent in Scotland rose sharply following the Covid-19 pandemic but has stabilised in recent years. This partly reflects 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.

“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.”

Rettie founder stepping into new role after leading Edinburgh property firm for 33 years