Hasn’t the weather been amazing? I can’t quite recall a better period of dry weather since I was locked away studying for my Highers… and that wasn’t yesterday. It definitely puts everyone in a better mood.
And what better way to round off a great week than by attending the Homes for Scotland Annual Lunch on Friday. It is the event to attend in the housebuilding calendar.
We are delighted to continue our sponsorship of the Annual Lunch as we are proud of our strong association with Homes for Scotland and the homebuilding industry.
With an unusually dry winter we have heard some of our housebuilding clients talking about short-term land supply becoming more of an issue as the delays usually associated with bad weather through the winter just haven't happened this year. Builders are ahead of programme on a number of developments.
I think it is the first time I have ever heard homebuilders grumble about the lack of rain!
Maintaining a sunny disposition, or having confidence in the homebuilding industry, is one key to its success. But are there clouds on the horizon?
There remains the potential of a cold front coming in, with uncertainties in the wider economy such as Brexit, IndyRef2, low oil price and a snap general election. And the short term forecast brings more immediate challenges such as increased planning fees, LBTT rates, land reform and consultations on things like taxing of ‘vacant and derelict’ land. The lack of land supply is a double-edged sword. It appears to me to be one of the reasons that the housebuilding industry remains buoyant and resilient. Heavy demand and lack of supply. That is both a benefit and a risk.
We are still nowhere near meeting the required targets to satisfy demand for new homes which is frustrating for both homebuilders and house purchasers. Annual construction of new private sector homes has dropped from 16,870 to 11,816 over the last year. The impact of the continued low oil price in the Aberdeen and Shire market must be a factor in this.
Both supply and demand are supported in varying forms by the Scottish Government. Support in the form of schemes such as Help to Buy continues – at a particular level in the market. City Deals, funding for infrastructure and other public sector support to aid the delivery of new sites is very welcome. The growth of the build to rent sector will also help alleviate some of the demand from those that are unable to buy a home. The Scottish Government’s focus on funding and delivery of social housing is also a growth part of the market and it has been interesting to see social housing providers competing with private sector housebuilders for key sites.
However, there is stasis in some parts of the housing market and this impacts supply and the natural cycle of the market. With an ageing population (a high proportion of whom live in expensive homes that have appreciated in value significantly over a 20+ year period), the flexibility to move to downsized accommodation can be difficult to achieve in practice. This is particularly the case where eye watering LBTT bills at the higher end of the market remain a material barrier to those wanting to move up the ladder to deal with growing families, moving to the right location for schools, etc. It also leaves the baby boomers stranded. Fixing one part of the market to help one demographic has consequences for others. Baby boomers, Generation X, Millennials and Snowflakes all have differing housing needs and consequent issues to contend with (not least being labelled).
These – and more – will no doubt be some of the issues that will be hot topics of conversation on Friday afternoon in the Sunshine [near] Leith. We are positive, can-do people in this industry and a pervading sense of cautious confidence still influences the housebuilding market in the central belt in my view, but we need to be wary of headwinds, both political and economic and be ready to adapt to change quickly and nimbly.