The annual rate of house price inflation in Scotland slowed from 10.1% at the end of 2007 to 6.3% in the first quarter of 2008.

Despite this slowdown, Nationwide said that Scotland has now overtaken London and Northern Ireland to become the UK region with the highest rate of annual house price inflation. Compared to the previous quarter, Scottish house prices are down only 0.1%, a smaller fall than in any other UK region.

Scotland’s relatively good performance in comparison to the rest of the UK is probably due to the fact that mortgage affordability in Scotland is less stretched than elsewhere. Despite having seen double-digit growth in five out of the last six years, the average price of a house in Scotland is still the second lowest in all of the UK regions, while the house price to earnings ratio is lower than in any other region.

This leaves Scotland somewhat less vulnerable to the trends currently weighing down on house prices in other regions. As a result, we expect Scotland to continue outperforming the rest of the UK on a relative basis.

Average house price: £149,834
Annual percentage change: 6.3%
Quarterly change (seasonally adjusted): -0.1%
Most expensive area: Edinburgh City
Least expensive area: Southern Scotland
Area with strongest annual price growth: Aberdeenshire & Moray
Area with weakest annual price growth: Southern Scotland

Within Scotland, the sub-region of Aberdeenshire & Moray had the highest rate of house price inflation at 18%, just ahead of Dundee and Angus at 13%. Edinburgh saw relatively solid house price growth of 8% during the last quarter, and maintained its position as the most expensive place to buy a home in Scotland. The average price of a house in Edinburgh stands at £254,202. By contrast, Southern Scotland is the least expensive place to buy and also saw the lowest annual house price inflation in the first quarter. Prices in Southern Scotland are essentially unchanged from this time last year at £140,164.