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Edinburgh, 2 September 2013 – The Scottish new build residential market is preparing for take-off according to new research from the UK’s leading property consultancy, Jones Lang LaSalle. However, optimism amongst Scottish housebuilders is tempered by concerns over the potential impact of independence.
The report on Scotland’s residential development market is based upon in-depth interviews with twelve private housebuilders in Scotland, responsible for over 80% of the country’s housebuilding.
Developers ready for challenge
Three developers expect to be building over 1,000 units a year by 2016 with four more planning to build over 500 units a year. Although the signs are positive for an escalation in development, housebuilders are less confident about prices, which they expect to rise by just 1-2% across Scotland over the next three years. Housebuilders are most optimistic about prices in Edinburgh, anticipating a rise of almost 3% by 2016, but they are less positive about Glasgow where they see minimal improvement.
Uncertainty over independence raises concerns
With the independence referendum just over one year away, most housebuilders currently believe that Scottish independence would result in less housing development in Scotland. Only one of the twelve housebuilders interviewed thought that independence would deliver more housing.
Housebuilders begin road to recovery
Across the whole of Scotland around 13,500 new homes were started in 2012, a marginal increase from the 13,300 units in 2011, and the first annual rise since 2006. The report by Jones Lang LaSalle forecasts that housing starts could reach 14,500 units in 2013 and move towards 17,000 a year by 2017.
Suburban Edinburgh and Glasgow are the preferred locations for housebuilders with the Central Belt and Aberdeen not far behind.
Housing market conditions turn up
Whilst there has been little change in house prices in Scotland in recent years, transaction levels have increased by 3.0% in the year to Q2 2013. However, at 74,500 in the last year, it is still around half the volumes seen in 2007/08.
The recent increase in turnover has been at least partly due to the introduction of some Government initiatives. For example, twenty three housebuilders and three lenders in Scotland have signed up to MI New Homes, allowing lenders to offer up to 95% mortgages on new homes up to £250,000 sold by participating builders. Deputy First Minister Nicola Sturgeon has also announced a £120m fund for a shared equity scheme in Scotland.
According to the report, institutional investment in the private rented sector has not yet gained traction in Scotland but market dynamics suggest that it’s only a matter of time before investors start looking outside of London and the South East and into Scotland. With yields in the region of 6-9%, the Scottish private rented sector should be an attractive investment prospect.
Jason Hogg, Director of Jones Lang LaSalle’s Residential team in Scotland, said: “Following six years in the doldrums, the Scottish new build residential market is now preparing for take-off. Housebuilders are enthusiastic about prospects over the next few years despite limited anticipation of price growth. Many intend to step up development activity as economic fundamentals and housing market conditions improve. The concerns raised about independence perhaps highlight a fear of the unknown rather than an outright objection to the principle, at a time when we are finally seeing a return to growth.”
Notes to Editors:
• Please contact Harry Hussain at Weber Shandwick for a full copy of the report on 0131 556 6649 or email email@example.com
+44 (0)131 301 6710
Cathrine Harrison - PR
+44 (0)161 828 6407