Savills has issued its 2026 Cross Sector Outlook for the UK’s real estate markets, highlighting a year that begins with lingering uncertainty but growing signs of renewed confidence across the residential, commercial and rural sectors.
While the UK backdrop remains complex - shaped by global tensions, inflationary pressures and evolving government policy - Scotland enters the new year with solid fundamentals and a market defined by resilience rather than volatility.
A UK Backdrop of Cautious Optimism
Across the UK, 2025 was marked by political speculation, shifting fiscal signals and slower‑than‑expected interest rate cuts. Yet the real estate sector proved remarkably robust. Inflation ended the year at 3.2%, and while rate reductions have been pushed further into the cycle, expectations for 2026 point to a 50‑basis‑point fall, bringing rates closer to 3%.
Nick Penny, Head of Savills in Scotland, said: “Confidence matters - and confidence is shaped not only by property fundamentals but by the wider economic and political backdrop. As clarity improves, so does decision‑making. The resilience shown in 2025 gives us a solid platform for a more constructive year ahead.”
Nick Penny, Head of Savills in Scotland
Residential: A Shallower Cycle and Strong Underlying Demand
Scotland’s housing market continues to move on a more stable price cycle than many parts of the UK. While Savills has downgraded UK mainstream price growth for 2026 to +2.0%, Scotland enters the year with less ground to recover and stronger late‑cycle momentum. Key trends include:
- Acute stock shortages in Edinburgh and Glasgow
- Resilient lifestyle‑driven demand in East Lothian, Fife, Perthshire and the Highlands
- Persistent rental market pressure due to chronic undersupply
- LBTT shaping buyer behaviour, pushing demand into peri‑urban and rural areas
Faisal Choudhry, Head of Residential Research in Scotland said: “Scotland’s housing market has consistently demonstrated a resilience that sets it apart from other parts of the UK. The combination of robust sales activity, steady price growth and broad-based buyer demand means Scotland is entering 2026 from a position of relative strength. As mortgage rates ease, we expect this resilience to translate into renewed activity across a wide range of markets.”
Cameron Ewer, Head of Residential in Scotland, added: “Scotland’s market continues to be defined by scarcity of high-quality properties in sought-after locations. Family houses, particularly in and around our major cities, are attracting deep buyer pools. The fundamentals remain strong, and as mortgage rates ease, we expect pent‑up demand to re‑emerge.”
Revised FCA guidance allowing greater mortgage flexibility is expected to support a 22% UK‑wide price uplift over five years, with Scotland well‑placed to benefit once sentiment improves.
Commercial: Supply Constraints Support Rental Growth as Investors Focus on Prime Locations
Scotland’s commercial property market mirrors many UK‑wide themes — but with its own distinctive supply dynamics. Development activity across Scottish cities has been limited for several years, and this scarcity is now driving above‑trend rental growth in prime assets.
- Offices: Edinburgh faces one of the tightest Grade A supply environments in the UK
- Industrial & logistics: Vacancy rates remain exceptionally low across the Central Belt
- Retail: Dominant locations continue to recover, with rental growth stabilising
Investment activity remains selective, but Scotland continues to attract capital seeking higher yields and longer income profiles than comparable English cities. Savills expects modest prime yield hardening (25–50 bps) in 2026, with income remaining the key driver of total returns.
Rural & Land: Policy Transition, Natural Capital and Energy Demand Drive Activity
Scotland’s rural sector enters 2026 in a period of significant policy transition. The Scottish Government will begin phasing in its new agricultural support framework this year, while progressing its fourth Land Use Strategy and implementing the forthcoming Land Reform Act.
Despite policy uncertainty, demand for Scottish land remains strong:
- Farmland values have been notably resilient
- Forestry and natural capital markets remain active
- Renewable energy developers are increasingly competing for grid‑enabled land#
Hugo Struthers, Head of Rural in Scotland, said: “Scotland’s rural economy is undergoing one of the most important transitions in decades. Policy change, natural capital markets and energy demand are reshaping land use - but they are also creating opportunity. The long‑term fundamentals for Scottish land remain exceptionally strong.”
Savills expects farmland supply and values to stabilise in 2026, before returning to growth from 2027 as policy clarity improves and environmental markets mature.
A Year of Gradual Improvement across All Sectors - Not a Sharp Rebound
Across all sectors, Savills expects 2026 to deliver steady progress rather than a dramatic turnaround. The lack of distressed sales, the persistence of supply shortages and the gradual easing of interest rates all point to a gentle upward trajectory in pricing and activity.
Nick Penny, Head of Savills Scotland concluded: “Scotland’s property markets have shown extraordinary resilience. With clearer economic signals, constrained supply and strong long‑term fundamentals, 2026 offers the prospect of renewed momentum across residential, commercial and rural sectors.”
Savills forecasts UK commercial property returns in the 8–10% range over the next five years - in line with long‑run averages - with Scotland well‑positioned to capture its share of the recovery.