A mid-year report on the Scottish housing market - Dr John Boyle

Casa by Moda's Build to Rent development in Glasgow, Casa, Vista ParkCasa by Moda's Build to Rent development in Glasgow, Casa, Vista Park
Casa by Moda's Build to Rent development in Glasgow, Casa, Vista Park | Casa by Moda
Retties expert Dr John Boyle looks at the picture for the sector as 2024 reaches its mid-point

As the housing market slips into midsummer and activity levels simmer down after the usually hectic spring and early summer phases, it seems a suitable time to take stock and assess how the market is performing. At Rettie’s we are just writing our Summer Market Briefing, from which there are a few key takeaways.

The sales market has been resilient despite the backdrop of high mortgage rates and a stagnant economy. The latest official house price figures show a rise of 4.5 per cent in Scotland in the year to April 2024 compared with the same period last year, and transactions are also up slightly in the most recent annual data (by 2.1 per cent). New listings are around 20 per cent up year-on-year in both Edinburgh and Glasgow, which does seem to show some market confidence among sellers. Although conditions remain difficult, it is hoped interest rate cuts from late summer will stimulate market activity further.

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The rental market has shown classic signs of a demand/supply imbalance for a couple of years, with rapidly rising rents between tenancies and falling supply (despite rising demand), principally due to political interventions. The Scottish Government’s new Housing Bill (as it stands) is doing little to encourage new investment into the sector, but it is hoped it will go through a revision process during its passage through Parliament.

Dr John Boyle is Director of Research and Strategy, RettieDr John Boyle is Director of Research and Strategy, Rettie
Dr John Boyle is Director of Research and Strategy, Rettie

The Build to Rent (BTR) sector has essentially closed down new investment due to the uncertainty created by the politics, but there has been some positive news, with the emergence of the suburban family BTR sector in Glasgow at Casa by Moda’s scheme, Casa, Vista Park. The new build market had a particularly difficult last couple of years due to falling demand caused by interest rate rises as well as such rises impacting on developers’ cost of finance. The inflationary environment since early 2022 has also fed through into build costs. As highlighted in the recent Homes for Scotland report on the SME housebuilding sector in Scotland, for which Rettie produced the sectoral data analysis, it is the smaller housebuilders that have been most affected by this downswing.

The public housing sector has also been significantly affected by a cut of around £200 million in its funding by the Scottish Government. Furthermore, there are concerns that the new planning framework (National Planning Framework 4) will constrain land availability for residential development. With the country and many local authority areas declaring a housing emergency, there needs to be a much more proactive government approach to getting this sector back on its feet or Scotland’s problems of a lack of available and affordable housing will worsen.

The new UK Parliament is unlikely to make much of a difference to these sectors. Housing in Scotland is devolved and within the remit of the Scottish Government, whereas market changes will probably be most affected over the rest of the year by decisions by the Bank of England Monetary Policy Committee on interest rates. Although the market remains resilient, it is still a tough one to operate in and these conditions look like being with us for the next six months at least.