Scottish economy healthier than rest of UK

Scotland stands as the only part of the UK where house prices are expected to rise over the next few months, and where the public sector economy shows improvement above the country average.

A cautiously optimistic report conducted by the Royal Institute of Chartered Surveyors Scotland (RICS) has revealed that whilst prices are slipping across the rest of the UK, Scottish house prices are still increasing.

RICS said that surveyors have predicted that house prices will continue to rise in the next three months, and that confidence in the market is the highest it has been in over a year.

Although, they were keen to emphasize that the stability of prices in the future cannot be guaranteed in the current economic climate.

Sarah Spiers, deputy director RICS Scotland, told to The Journal: “Surveyors in Scotland are confident that prices will rise moderately over the next three months.

“However, the situation is fluid and highly dependant on the scale of public sector spending cuts and the performance of the wider economy.”

Ms Spiers also emphasized the negative effect cuts in the private sector will have on the housing market.

However, Martin Ellis, an economist at Lloyds Banking Group PLC stated: “We expect that UK house prices will remain static overall in 2010.”

Economist and Investment adviser Jonathan Davis rebuked any sense of optimism in the housing market, telling The Journal: “If Scottish prices bucked the national picture for one month it tells us nothing about the trend – which is down, down, down.

“Also, don’t just look at prices, look at volumes of lending and transactions and numbers of estate agents being made redundant, developers going bust to see the future.”

Chris Boisseau, director at sales and letting agent Factotum, also commented on the issue, emphasising that the supposed house price increase was “not really a true picture, look at it as more of a fragile beast, not the juggernaut it once was.”

Meanwhile a report by the Royal Bank of Scotland highlighted that in the wider economy the private sector is also showing signs of improvement, rising “at a stronger pace than that recorded for the rest of UK.”

Donald MacRae, Chief Economist at the Bank of Scotland, said: “Scotland’s recovery from recession was maintained in August with activity rising in both manufacturing and services.”

Against most trends across the UK, employment levels in Scotland have also risen mildly in the private sector, with employment growing in eight of the past eleven months. Most of the growth in payroll numbers was related to an increase in the goods-producing sector.

However, Mr MacRae also commented: “New orders growth in both sectors [manufacturing and services] remains weak and rising costs continue to exert pressure on Scottish business.”

The Business Outstanding Index emphasised that backlogs of work during August continued to fall, as they have done since June. The pace of decline was also the strongest since April and greater than the UK-average.

Of all the sectors, travel, tourism and leisure showed the strongest performance in the service sector.