SCOTS are supposed to be canny about money. So why are we scrambling to buy over-priced houses on the eve of a recession, with rampant inflation and an energy price shock? Are we mad?

As The Herald reported yesterday, prices in Scotland are rising at nearly 12% per annum, equivalent to £160 a day and £700 for a detached house. In England, price rises have slowed to 7% and in the north of England less than 4%.

Have Scots suddenly discovered heaps of cash behind the sofa? Have lots of wealthy Scots been leaving money in their wills? Do buyers know something the rest of us don’t?

Scotland is in the middle of an unprecedented cost of living crisis. Two thirds of us are heading for fuel poverty. Inflation is forecast to rise to 13%. That means interest rates and therefore mortgage rates are going nowhere but up.

Personal finance gurus like Martin Lewis of MoneySuperMarket warn that millions of middle income people face hardship. At the very least, there is going to be the mother of all recessions. Scotland’s growth rate already lags the UK.

When wage rates fall, as they are doing at the fastest rate in 20 years, folk are supposed to become more cautious. It doesn’t make sense. Like buying bitcoins on the eve of a crypto currency correction.

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House prices are a bit lower in Scotland, but they have long since ceased to be places to live and have turned into speculative investments, underwritten by the state. Your house is the only capital gain that isn’t taxed.

But that doesn’t make housing a one way, no lose bet. The housing market has for some time been looking like a bubble ready to pop.

Prices have been outstripping wages year by year and now stand at more than five times average pay in Scotland.

So what is going on? Well, for one thing the banks have been behaving badly again, luring families into mortgages they can barely afford through teaser rates, extended loan periods and other inducements. The banks are awash with cash right now from government-backed Covid loans and QE money printing.

Banks will be banks, but that doesn’t explain why Scots seem so relaxed about their ability to pay humungous loans many times their income. One factor might be the current labour shortage. There’s a lot of jobs around and pay rates are rising, though way below inflation. Perhaps no one fears unemployment any more. Older Scots are downsizing, but that should lower, not increase prices. Migration is down also.

It seems that Scots have finally come to accept the estate agent’s rule that house prices can only go up. Even after the 2008 financial crash, caused by irresponsible mortgage lending, prices recovered in a couple of years. There is an expectation now that governments will not allow house prices to fall. Some people could be in for a nasty shock next year.