‘Lack of supply likely to drive up house prices by 20 per cent over next five years’

Excess demand for property in the market fuelled house-price growth of 4 per cent on average last year, Rettie found.

Average house prices in Edinburgh rose over 6 per cent in 2017 as a whole, while prices in Glasgow were up almost 8 per cent.

Rettie said demand is also spilling out from the cities into the commuter hinterland, where new build development is absorbing demand.

There was a sharp increase in prime market activity in the second half of 2017, leading to a rise of more than £22m in LBTT revenue compared to a year earlier.

Meanwhile, rental demand remains strong in the city centres, which will likely support continued rental growth.

But while undersupply is supporting a buoyant start to 2018, the estate agent said the looming spectre of Brexit may cool confidence later in the year.

Andrew Meehan Associate Director at Rettie & Co., said: “This lack of supply is having a notable impact on prices in desirable areas, where scarcity, combined with the high demand, is creating a highly competitive environment at closing dates. This trend began in the summer of last year, when sales in the desirable family markets and prime market, which had been subdued since the introduction of LBTT, came back to life to record their highest level of trading in a decade. This spike in demand has continued into 2018, but available stock coming to the market remains low. Nationally, stock levels at the start of 2018 are down up to a third in the most popular sub-markets. It is this trend that is creating a sellers’ market in traditionally desirable locations.”