In 2007, the Scottish housing market outperformed all other UK regions, recording a capital growth rate of 13%, according Knight Frank.

New homes built in Scotland experienced a growth rate of 19.9% over the course of last year, but sales volumes fell by 16% in 2007 and further reductions are expected in 2008 in response to the global credit crisis.

Knight Frank forecasts that Scotland will witness house prices grow in value by one per cent in 2008 against an average fall of -3% across the rest of the UK.

Liam Bailey, Head of Residential Research at Knight Frank, said: "Scotland's housing market is proving remarkably robust in the face of the turbulent market conditions affecting the wider UK market.

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"Analysis published in our latest research on the state of the Scottish residential development market (Steadfast Scotland) shows that house prices across the country grew by 13% in 2007, a rate well in excess of the UK average of a little over 5%."

Mr Bailey said Knight Frank research shows that these figures disguise varied local market performance.

"The first is that while house prices in Edinburgh and Glasgow ended 2007 12.9% and 15.5% higher respectively, peripheral towns and suburbs recorded growth of up to 19%. Indeed the new build sector even exceeded this level, returning a growth rate of just under 20% over the year.

"However, while values have increased, partly in response to a lack of supply and rising wealth creation, sales volumes did not. Over the course of 2007 sales volumes fell by 16%, partly as a result of weaker market conditions in the final quarter of the year, but also due to constrained supply in the new build sector, " he added.

(GK/JM)