Who’s buying?
Central Edinburgh and Glasgow both attract a wide range of buyers including students, young and mature professionals, downsizers, second home owners and investors.
The number of privately rented households doubled in both cities over the last decade. The proportion of such households is 27% in Edinburgh City and 16% in Glasgow City, according to the Scottish household 2012 Survey, with more professionals, families and downsizers choosing to rent. This growing market has in turn strengthened the residential investment sector in both cities and we can expect to see this trend continue.
The downsizer market is likely to experience significant growth. There are rising numbers of older people in both cities and they often hold significant amounts of equity in their current properties. One of the developments analysed, in Glasgow’s West End, has attracted a number of downsizers, looking for a lifestyle change in a sought-after location and able to buy at the top price range.
Second home buyers in Edinburgh and Glasgow, seeking a pied-à-terre, whether for business or pleasure, tend to be equity-rich. New build properties are attractive to this market as they provide low maintenance internally and communal areas are usually managed by professional property managers.
A large proportion of new build buyers continue to be owner occupiers. Whilst Help to Buy has facilitated a number of sales, banks continue to impose stringent mortgage conditions.
Furthermore, for owner occupiers, location is paramount and sites in prime locations will continue to command a premium.
Recent developments have identified the importance of place making. This has been achieved by offering a varied housing mix, by adding value through design and specification detail, attractive outdoor amenity spaces, provision of storage areas and ancillary features such as gyms, locker rooms, cycle storage areas and off site car parking provisions.
There is an increasing need for new build accommodation across both cities, particularly for family homes. This imbalance between demand and supply is likely to be exacerbated over the next 20 years. The lack of new build is particularly noticeable in prime locations.
Buyer origin
At 75%, the majority of buyers of new build properties in Edinburgh and Glasgow stayed within their respective cities. The majority of remaining buyers came from other parts of Scotland and the United Kingdom. Edinburgh appears to be a particular draw for those in London. Glasgow purchasers came from as far afield as the United States and Portugal.
Meanwhile, Edinburgh saw a noticeable trend of Arab, Chinese and Singaporean buyers, many of whom have bought prime properties in central Edinburgh.
These trends are being experienced in the second hand market in both cities too. Therefore, the marketing of properties on a local and international basis is important to attract a variety of purchasers.
Future supply
Savills Research analysis of planning applications for residential developments across Edinburgh City and Glasgow City shows that around 4,900 and 4,300 private properties respectively are currently in the various stages of planning.
However, the official housing Land audit publications for both cities suggest a total future supply of around 19,000 in Edinburgh City and 14,000 in Glasgow City. These significant numbers include strategic sites, many of which are in large regeneration areas.
In reality, there are likely to be fewer larger-scale developments out with the core hotspots coming to the market. This could be due to various factors such as delays in arranging finance, high infrastructure costs, re-design issues and challenges of achieving the layout that maximises the financial value of the scheme.
For many large sites, with lapsed detail or outline planning consents, the possibility of development to commence according to their original plans, if at all, is highly unlikely. Such schemes could be replaced with a different housing mix, affordable housing and private rented accommodation rather than owner-occupied properties.
The next five years
■ Demand for well located, high quality and appropriately priced new build properties will continue to outstrip supply, especially in prime locations.
■ Whilst there are a large number of properties in the planning pipeline across both cities, we do not anticipate the majority will launch on to the market in the next few years.
■ Help to Buy will continue to facilitate sales and will particularly benefit mid-market new build purchasers. The equity loan element of Help to Buy in Scotland is due to finish in 2016. however, the high level of demand has lead to concerns over the amount of funding set aside for this scheme by the Scottish Government.
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