SCOTTISH house prices are to buck the UK trend in 2008, according to the latest economic forecast by HBOS.
The Edinburgh-based bank has predicted that prices north of the Border are to grow by 4 per cent in the next year to an average of £148,000 - contrasting with expectations of flat prices throughout the UK as a whole.
It added that Scottish economic growth was set to remain at an above average pace in 2008 at 2 per cent, underpinned by a strong employment market and relative affordability in the housing market compared with the rest of the UK.
The overall report is more upbeat than other forecasts, with tomorrow's Ernst & Young's ITEM Club report expected to give a more pessimistic view of Scottish economic growth, saying it is likely to fall back below that of the rest of the UK in 2008.
HBOS' chief economist, Martin Ellis, told The Scotsman in a conference call: "The economic outlook for Scotland is somewhat more uncertain at the moment than it has been for the past few years.
"However, we are sitting in a position of relative strength - the house price to earnings ratio is the most favourable in the UK."
He added that HBOS expected the Bank of England would drop
interest rates to 5 per cent over the next 12 months - 5 percentage points lower.
But while an economic slowdown has been predicted for the UK, Ellis said the Scottish economy was likely to grow by 2 per cent in 2008 - topping the long-
term average of 1.9 per cent. 2007 was the second year of consecutive growth above the average.
The report said: "In 2008, global economic growth is likely to slow, reflecting a weaker US economy constrained by the subprime crisis. UK economic growth is also likely to moderate and both are likely to be a drag on Scottish growth next year."
Property transactions in Scotland are set to fall by 5 per cent in 2008, Ellis said, adding that the number of homes sold was likely to take the brunt of the housing slowdown, falling from an estimated 150,000 this year to around 140,000 in 2008.
The report also revealed that UK savings were set to rise by a record £80 billion to £1.1 trillion next year, boosted by a move towards savings accounts rather than more risky options, in the currently volatile economic climate.
