Scottish resilience in play as house prices fall

By Raissa Kasolowsky

EDINBURGH (Reuters) - Scotland's housing market is cooling like elsewhere in Britain, but with the nation's most affordable mortgages experts think it may escape the worst of the property downturn as it did in the 1990s.

While the average house price in Britain fell 1 percent in the first quarter of 2008 compared to the previous three months, Scottish house prices registered a 0.2 percent rise, according to the Halifax house price index.

"Scotland's housing market is in the strongest position in the UK and will be more resilient, mainly because of affordability," said Fionnuala Earley, chief economist at the Nationwide building society.

Professor Steve Wilcox, author of the UK Housing Review, said the profile of the Scottish economy and labour market in the 1990s differed substantially from the rest of Britain. This shielded it from the worst of the housing crash that began in the late 1980s and hit the Southeast the hardest.

But now, Wilcox said, the two economies and the housing markets were more in tune than before.

"The dynamics for Scotland are very much the same as in the rest of the UK: sharp rises in house prices and mortgage costs, as well as an increase in private renting," Wilcox said.

Nevertheless, he said there were still factors that could cushion the downturn.

One is the fact that house prices in Scotland have not risen as steeply as in other parts of Britain. Over the last decade, house prices in Scotland have risen 146 percent, versus a 191 percent rise in Greater London, according to the Halifax house price index.