Scotland’s new build market is witnessing impressive levels of transactional growth and an increase in prices
We are seeing elevated levels of activity across Scotland’s new build market, with the number of transactions reaching 15,715 during the 12 months ending August 2021. This is the highest annual figure in over a decade and 9% higher than the level two years ago before the Covid-19 pandemic. Nearly a fifth of new build activity has taken place in the city hubs of Edinburgh and Glasgow. Here, transactions are 16% higher than the pre-pandemic level. Let’s examine the main drivers of demand.
Demand for space
Alongside transactional growth, the average price for new build properties has reached a record £346,672 in Edinburgh and £265,655 in Glasgow, boosted by demand for larger properties that offer more outdoor space.
However, the new build market for first-time buyers in Scotland remains challenging following the end of the Help to Buy scheme and restricted lending on higher loan to value mortgages, particularly for flats.
Competition for sites
Strong house price growth, high forward sales and reservation rates, an increasing appetite for sites from a range of players and an acute shortage of opportunities have driven upward pressure on development land values across Scotland.
In the last quarter, Scottish greenfield land values grew by 3.9% and urban values by 2.0%, marking the highest quarterly growth in greenfield values in four years.
Nearly a fifth of Scotland's new build activity has taken place in the city hubs of Edinburgh and GlasgowFaisal Choudhry, Director, Residential Research
Competition for development land has continued to increase significantly over the summer. A net balance of 89% of Savills development agents reported increasing bid levels in Q3 2021 compared to normal levels. Bid values have exceeded guide prices significantly in many markets as a result.
Many developers are looking beyond their normal site size and location to secure sites. This ranges from major housebuilders looking to purchase larger sites through to considering much smaller sites than they normally would as well as those in more secondary locations. As a result, all types of sites are sought after.
Supply constraints lie ahead
Looking ahead, with hybrid working patterns likely to continue, buyers will continue to seek homes that offer more space due to the experience of Covid-19 and ensuing lockdowns.
As people return to work in towns and cities, we will see increased demand for a wider range of homes in 20-minute neighbourhoods in which daily necessities, such as work, shopping, entertainment, schools and recreation are all within a 20-minute walk or cycle from a home.
But new build supply remains intermittent due to growing delays in the availability of labour and materials, alongside chronic delays in planning. These factors will continue to apply upward pressure on values going forward, particularly for good quality and appropriately priced properties in desirable hotspots.
Read the articles within Report: Prime Scotland Residential – Winter 2021 below.