Development
The residential development markets across Scotland, like most regions of the UK, have suffered since the downturn in the financial markets post-2007. The financial crisis has made residential developers and housebuilders across Scotland extremely risk averse.
Large-scale development in Glasgow, Edinburgh and Aberdeen is limited to key locations in and around the centre of these cities, as many long-term brownfield sites remain unviable, private funding is restricted and prospective home buyers struggle to raise enough finance to purchase.
The scale of Scotland’s new build housing sector shortfall was highlighted by the release of the Q1 2012 Scottish Government statistics. They reported a total of only 15,150 new homes completed across all tenures during 2011 – a 41% decrease since the credit crunch and the lowest level since 1931, excluding the wartime period.
The delivery of residential units by the private sector has been even more austere; only 9,893 new private sector homes were completed during 2011, a 54% decrease on 2007 levels and the first time private sector delivery has fallen below 10,000 since 1970.
Demand and supply
There is one main obstacle to private sector recovery and that is constraints on mortgage lending, particularly in relation to the high deposits buyers now have to procure. Across Glasgow, Edinburgh and Aberdeen, three key Scottish markets, there has been a lack of good quality new build stock entering the market to satisfy demand.
For example, within the city centres and prime suburban areas of Edinburgh and Glasgow, a lack of stock has meant that the rate of sale for some new build developments has been around four to five units per calendar month. There is demand for good quality apartments in both of these locations.
Prime areas in both locations (such as Edinburgh's Stockbridge, Grange and city centre and Glasgow's West End) have a shortage of larger two and three bedroom apartments. These are attracting downsizers and empty nesters, or parents looking to buy as an investment for children attending university. Glasgow City Centre is currently under providing the smaller one and two bedroom apartments, which are attainable for young professionals and first-time buyers.
Only two new build city centre developments have been brought to the market in Glasgow over the last 18 months, forcing buyers to purchase resale properties due to the lack of supply of new build residential units. A similar story is evident in Edinburgh with only a limited number of new developments on the market. This lack of new supply has resulted in a significant increase in off-plan reservations of prime new build properties. Two and three bedroom apartments and penthouses in Edinburgh's Grange area have sold off-plan, mainly to downsizing buyers. In the city centre and Stockbridge a diverse range of buyers have secured off-plan, high specification, new build and scarcely available conversion properties.
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