Demand for high-quality product remains strong in the two main cities
In recent years, Scotland’s new build developments have filled supply gaps where the second hand market has been lacking. New build transactions increased annually by 6% to 14,738 during 2017, supported by an increase in private new housebuilding over the same period.
However, a drop in housebuilding resulted in a 4% annual fall in transactions to 14,128 in 2018. The drop in supply has been felt especially in the main city hubs of Edinburgh and Glasgow. Between 2017 and 2018, new build transactions in Edinburgh fell by 24%, from 1,993 to 1,512. In the city area of Glasgow, new build transactions fell by 32%, from 1,578 to 1,074 over the same period.
As demand remains ever strong, the average new build monthly house price between October 2017 and October 2018 in both cities increased by 12%, according to the UK House Price Index.
Average monthly new build house price Intermittent supply lifts prices to record levels
Source: UK House Price Index
In Edinburgh, the average went up from £269,186 to £300,286. In Glasgow, the average increased from £161,331 to £181,661 over the same period. Looking ahead, there are a number of significant sites in both cities due to launch. But we expect supply to remain discontinuous, thus keeping upward pressure on values.
In the post-Quartermile era, there are now a handful of sites in central Edinburgh, with prices per square foot now reaching £800, typically attracting downsizers. There are a number of large sites currently marketing around the centre, with relatively affordable prices. At an average of just over £300 per square foot, these are attracting first-time buyers as well as downsizers. Car parking availability remains a key selling point at developments in central and inner suburban locations. There is demand for more attainable, mainstream flatted product in Edinburgh, as evident in the strong rate of sales being achieved at current sites around the City Centre.
Demand for new build family housing is being met at several sites across the west and south east, where the average price per square foot is around the £250 level. The challenge for these sites is to create a sense of place, with a community feel.
The highest prices per square foot in the city area of Glasgow are typically achieved in the West End. At present, a small number of sites are marketing, with prices per square foot ranging from £300 to £500. Some individual properties in the Park area have achieved closer to £600 per square foot.
There is long-term capacity for more high-quality developments at this pricing level in Glasgow’s West End and also the City Centre, which remains starved of new build supply.
Across Glasgow’s southside, a number of new sites have launched over the last year. With prices per square foot ranging from around £200 to £300, pricing will be key going forward as more future sites will result in increased competition. Demand for family housing remains strong on the periphery of Glasgow and locations that have good access to schooling.