Scotland’s property sector must accept that current conditions are the “new norm”, though there may be a slight improvement in the second half of the year, a gathering of professionals was told last night.
Expectations of a return to near-zero interest rates are “unrealistic” and demand for office space is likely to continue outstripping supply for some time, said Alasdair Steele, head of commercial at Knight Frank.
He told a property summit in Edinburgh that the sector craved political and tax stability that would bring some certainty to investment decisions.
“Landlords need to get realistic about interest rates and face the fact that things are not going back to the low levels of recent years. This is as good as it gets,” he said.
Notwithstanding further geo-political disruptions, he said the market could expect a more settled period. “We hope for a better second half. We need that stability,” he said.
Positive highlights were a continuing supply of hotel projects and a return of demand for space in prime high street locations.
Speaking after the event, organised by Hampden Bank and thebusinessdesk, he said he did not think the Scottish government considered the reform of business rates to be a priority and that the property sector itself was focused on housing and stimulating more activity in building more homes.
Ali Afshar, managing director of AMA Homes, told the audience that the housing sector was effectively stalled by the cost of building which was eroding margins and making projects unviable.
He repeated the findings of this week’s Savills analysis showing that housing completions fell by 13% in 2025 to just 17,336 homes – the second lowest annual total since 2016.
The slowdown comes despite a slight recovery in planning applications, pointing to a fundamental issue of sites entering the system but increasingly unable to progress to construction.
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