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Is the Scottish housing market bucking the Brexit trend?

Is the Scottish housing market bucking the Brexit trend?

The announcement at the end of last week of Springfield Properties plc’s acquisition of Walker Group is a great indicator of the strength of the Scottish housing market.

The deal – in which we acted for Springfield – helps strengthen Springfield’s presence in the Central Belt, particularly around Edinburgh.

One of the key things that struck me in the press coverage following the deal was Springfield’s Sandy Adam’s comment that “The most important thing about any company is the people and not the properties”.  I think that’s true of a lot of businesses, but especially so in the housebuilding sector: from suppliers, to professionals, to contractors and, ultimately, housebuilders and their sales’ teams on the ground. The people make the difference and we have a lot of highly talented and skilled people in this industry.

During current uncertainty, the Springfield and Walker deal stands out as one that shows confidence, positivity and belief in the people involved and, importantly, the market.

The fundamentals in the Scottish private housing market are undoubtedly strong.  There remains a significant under-supply of new homes, despite much new housebuilding activity.  The BBC recently reported that 7,000 fewer new homes are constructed per annum than are needed. Incidentally, I disagreed with their report on 24 January which criticised land-banking by housebuilders as a deliberate constraint on supply – I just don’t see that at the coal face. Land is expensive and housebuilders need to build and sell quickly to home buyers to release profit.

The mortgage market remains in good shape, particularly for those with equity.  Rates are affordable and fixed rate deals represent excellent value for borrowers.  Some of the housebuilders are also offering excellent incentives - from LBTT contributions through to part exchange. Help to Buy at the more affordable end of the market has been a huge success. So demand is well supported.

We owe it to ourselves to be positive about the market.  In the recessionary times of 2008 and for the years following, things were quite different.   Today, while Brexit represents a challenge, it is also an opportunity.  The challenge is to maintain buyer optimism and positive sentiment amongst those who wish to move home.  The acid test of that will come in the springtime when, traditionally, new home sales rates start to pick up after the winter as people complete their preparations for moving home and get second hand properties on the market.

The greatest threats that Brexit currently brings – to my mind – are the risks around the supply chain and the potential impact on foreign labour leaving these shores.  All of that remains uncertain until what Brexit will actually mean crystallises so, for the time being, maintaining that positive outlook and “getting on with the day job” are core to our housebuilding economy.

By Scott Peterkin
Partner, Property

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