The prime housing market typically represents the top 5% to 10% of the market in any region.

“Scotland’s prime market is looking robust, with a predicted five-year growth rate of +21.0%, significantly ahead of the overall prime UK growth rate,” said Faisal Choudhry, head of residential research at Savills in Scotland.

“The prime Scottish market is benefiting from strong demand for energy efficient and well-presented properties near local services, places of work and top-performing state schools. Meanwhile, commutable country areas with good access Scottish cities and waterfront areas remain popular.

“However, the increase in the Land and Buildings Transaction Tax (LBTT) Additional Dwelling Supplement (ADS) from 6% to 8% announced in this week’s budget will further exacerbate the challenges facing Scotland’s private rented sector. This would mean the purchase of a £300,000 additional home would incur a total LBTT bill of £28,600 compared to £22,600 before the change, equating to a 27% rise.

“Against a backdrop of constrained supply, increased taxation and ongoing regulatory changes including rent caps will put further pressure on private landlord finances. This will ultimately lead to higher rents, which have already risen by nearly 50% in the last five years across Scotland.”

Cameron Ewer, head of Savills Residential in Scotland, said: “The Scottish prime market has been adjusting to wider economic challenges and defying gravity this year, with strong premiums and some record prices for ‘best in class’ properties.

“The first Labour budget in 14 years was bound to raise questions about market impact, but with no changes to income tax, VAT, or employee-paid National Insurance, there was little to dampen the appetite of new buyers. Sensible, realistic pricing will continue to be required to keep the market moving and generate competition. This will remain the case until any future interest rate cuts are implemented.”

Ewer added: “Currently, there are two and a half times the number of new buyers for each available property in Scotland compared to pre-pandemic levels. While increased Capital Gains Tax on the sale of shares may prompt buyers to explore other sources for home deposits, the VAT on school fees may be the most impactful change.

“This is likely to reduce purchasing power for some families and increase demand in the catchment areas of good local schools, which could push house prices upward. Recent reports suggest that migration from south of the border to Scotland is at an all-time high, driven by comparative good value here, enabling families to commit to paying for private schooling and university fees here.”