Over the last five or so years, the Scottish and UK property industries have been tested to their limits.

Every part of the country has felt the impact of falling values, risk-averse investors, nervous consumers and the multitude of related problems these have created for property.

Thankfully, we're now seeing something resembling a steady recovery ahead. Deloitte Real Estate's 2014 property predictions reflect increased levels of activity in the market – in the first of a two-part series, we outline our thoughts on growth, capital values, overseas investors and resurgence in construction confidence.

1. The UK economy will deliver strong growth

Not pre-recession growth, but something in the region of 2.5 per cent over the year. Recent forecasts from the Office for Budget Responsibility and the International Monetary Fund agree, but we shouldn't get carried away. We're still vulnerable to external shocks, particularly from the Eurozone; under-investment by businesses nervous about risk, although that may be changing as firms seek to put their money to use; and underweight consumer spending, but that could improve this year. Overall, we're in better shape than we were 12 months ago.

2. Capital values will improve

With more investors considering speculative development again for the first time in several years, Scotland and regions of England are seeing a northerly shift of money which has hitherto remained stubbornly in London. Overseas buyers have been and will continue to be significant players, and a number of private equity houses will be firmly in the mix. This regional correction is happening now, and happening quickly, but later in the year, things are likely to stabilise to some extent, so rental value growth will take on increased importance once again.

3. Taiwanese insurance companies may venture into Scotland

Relaxation of regulations in China means Taiwanese insurance companies can now invest in assets outside of the country. We expect them to make moves in the London property market early this year, then move northwards as they gain experience.

4. Construction costs will increase

Construction was one of the sectors worst-hit by the recession, but things are getting better. That means contractors are getting choosier about the projects they accept, and prices are already starting to creep up. After an initial surge, we'd expect normal cost inflation to return, as the market continues to stabilise in the coming year.

We'll post the second half of our predictions in the coming days – but we'd be interested to hear what you think of these in the meantime.

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