Housing market is looking stable in Year of Fire Horse, guest blog by John Boyle, Director of Strategy and Research at Rettie

2026 is the Chinese Year of the Fire Horse, a sign that only gallops around every 60 years and is associated with dramatic transformation. It is said to bring both chaos and progress, good fortune and bad.

Turning to Scotland’s housing market, our forecasts may seem tame by comparison, but we can assume that the Fire Horse’s hooves will not scorch property values too severely this year.

Last year we predicted that 2025 would be a steady year for Scottish housing, and that has proved accurate. House prices rose modestly, likely around 3 per cent by year end, while transactional sales growth looks set to slightly exceed our forecast of 5 per cent.

Private rents also moderated as the sector adjusted to a more stable environment following the passage of the Housing (Scotland) Bill. New build activity has increased modestly, but the sector continues to face significant viability challenges and limited access to effective land. As a result, housing delivery remains well below pre-pandemic levels.

So, how is 2026 shaping up? We forecast average house price growth of around 3 to 4 per cent, broadly in line with recent years. That is likely to be only slightly ahead of consumer inflation, reflecting a stable market where demand is rising gently as interest and mortgage rates ease. Bank lending remains sensible and steady, and affordability constraints continue to cap price growth.

Rents are expected to increase modestly, by around 4 to 5 per cent, as landlords adjust to inflation and seek to align properties with market values ahead of potential rent controls in 2027. Again, affordability will temper further increases as rental supply slowly recovers.

House sales in Scotland have been steady for more than a decade, averaging about 100,000 transactions annually. That stability contrasts sharply with the pre-2008 boom years when volumes regularly exceeded 150,000.

With steady economic and wage growth forecast by the Bank of England and others, we expect this to feed through to the housing market. Sales transactions are projected to rise between 2 and 5 per cent in 2026, following the small but notable uplift seen last year. A larger jump of more than 5 per cent appears unlikely in the near term.

We are not expecting major property tax changes in Scotland’s January Budget, though there may be a temptation to align with the UK’s decision to raise property income tax rates by 2 per cent. A safe and unremarkable Scottish Budget would be welcome, though the Fire Horse may have other ideas.

A mansion tax seems unlikely (at least in this Budget) given the measures that would be required to introduce it.

The last Year of the Fire Horse was 1966, a year when England won the World Cup. Here is hoping 2026 brings Scotland its own version of good fortune.