Scottish property: why it's time for a Highland fling Edinburgh suffered badly after 2008, a year in which prices fell by 10 per cent. RBS and HBOS, two of the banks that collapsed, were also major local employers - particularly with the kind of people who bought houses in the centre of the city. Prices fell a similar amount again in 2009, and remain some way below their historic peaks. Yet Edinburgh holds many of the same attractions as London for property investors, at a fraction of the price. The Scottish capital's economy is the second strongest in the UK. There are shops, museums and good transport links. This year should even see the launch, at last, of Edinburgh's troubled and delayed tram project to the airport. There is also a clutch of good schools. As well as Fettes, where Tony Blair was educated, there is George Heriot's and Loretto, as well as good state schools. For culture buffs, there are the August festivals as well as good museums. Even if you can't bear the thought of Fringe theatre, you'll be soothed by the thought of all the rental income you'll get from letting your flat to American tourists. In addition to this, there are Scotland's natural joys - the mountains and scenery of Glencoe and the Cairngorms are within comparatively easy reach of the city. "The access to the outdoors is fantastic," says Douglas-Home. The city is also a very manageable size. It has a lot to offer and punches well above its weight culturally. As the London market continues to heat up, more buyers are turning to Edinburgh as the next-best option. Certainly it is cheaper - in the centre of Edinburgh, prices average £308,777. Compare that with Greater London, where they average £475,940 (much more in the centre) and it is clear why Scotland continues to be popular. Much of the growth in central London has been driven by foreign investors and even they are starting to see Edinburgh as an alternative investment. "The number of international buyers in Edinburgh is increasing at a phenomenal rate," says Andrew Perratt of Savills. It's largely down to the schools, which are the main attraction. Russian buyers are sending their children to Merchiston Castle School, George Watson's College and Edinburgh Academy. We have also seen an increase in Chinese buyers, who are attracted to Edinburgh for the freehold properties. There are also lots of expats, based in places such as Singapore and Dubai, looking to either invest or hold a property in Edinburgh. Perhaps they are intending to return to their roots later. He has also seen this interest sparking a resurgence in transactions and prices. The residential market across Scotland showed strong performance in 2013, with a 10 per cent annual increase in transactions. Alongside some of the traditional market hubs of Aberdeen, Edinburgh and Glasgow, there was a strong performance in some of Scotland's secondary locations. Prime values across Scotland have remained subdued over the past few years, due to the high levels of stock. However, supply in the hot spots of Edinburgh and Glasgow has been falling and in the country locations it has been stabilising. Interestingly, what is true of city centre flats and houses seems not to hold for country estates. In the middle market of the countryside, for homes under £1m, the market has yet to turn a corner as sharply as the prime urban locations. But for the bigger estates, above £2m, there is still a healthy demand. "Those buying the big old rural properties tend to be buying for the lifestyle," explains Douglas-Home. They tend not to be from Scotland, and they want the fishing and the grouse moor and the roaring fireplaces. The market for those kinds of houses is still very healthy. Between the lines, the suggestion is that the main country market has also bottomed out. The recovering UK economy, bolstered by a bit of Help to Buy spending, should soon inspire a return to capital growth north of the Border, and not just in the city centres. Of course, the Damoclean Claymore sword hanging over Scotland at the moment is the threat of independence. It is unclear what this would mean to house prices. The Yes campaign argues that separation from the UK would allow Scotland to set its own property tax rates, spend more on new housing and generally make decisions solely in Scottish interests. The No campaign says that the long - and no doubt messy - divorce process would mean years of uncertainty for the markets. It has been estimated that interest rates would also be higher in an independent Scotland. And that its government would have to pay around 1.5 per cent more than its UK counterparts to borrow money. The effect would be to make Scottish property cheaper. Already there have been suggestions that investors - particularly larger developers - are waiting to see what happens in the referendum on September 18. There have also been inklings that at the top end of the market - £2m and above - there has been a slight easing of demand over the past few years. Yet aside from that, there is little to suggest that the referendum has hurt most of the market, as the Knight Frank figures suggest. "Everyone has been expecting the independence vote to have a dampening effect, but we haven't really seen it," adds Douglas-Home. At the very upper end, buyers are perhaps holding back a bit. They tend to have jobs in financial services and are waiting before they commit to that kind of investment. In the middle market, however, we are registering new buyers all the time, from Scotland and farther afield. I think because the market has been slower to recover, there is a lot of pent-up will to move. People are thinking they will crack on with a move anyway, regardless of the referendum. Other agents agree, saying that uncertainty about a slowdown has only had an effect at the very top of the investment market. "The question of independence will play a more significant part as we approach the referendum in September, but it doesn't yet seem to be impacting on demand for Scottish property," explains Malcolm Leslie of Strutt and Parker. We enter 2014 with a great deal of positive sentiment and momentum from 2013. However, he sounds a note of caution separate from the anxieties around independence. The proposed changes to Stamp Duty in Scotland could have a significant impact as the current system is replaced by the Land and Building Transaction Tax (LBTT). We will not know the final rates until they are announced in the autumn, but it is expected that sales above £200,000 will incur a higher rate of tax than at present. Odds on a win for No vote are currently at 1/6, and the campaign consistently displays a 20-point lead in the polls. It looks as though the Union is still in safe hands. Rather than squabble with a thousand other buyers for a bit of London and the Home Counties, why not make a move on that central Edinburgh flat or baronial estate you have been coveting? If the question is whether you should buy north of the Border in referendum year, the answer seems to be an emphatic "Och aye." Read more: Scottish independence: what will happen to house prices?