Bruce Robertson, lending manager at Atelier, examines the current state of the housing market in Scotland
Over the course of 2023, the housing crisis has grown into a nationwide issue. With Argyll and Bute Council declaring a housing emergency back in June, and Edinburgh and Glasgow councils recently following suit, the fact that parliament voted against making this a nationwide declaration is a greater reflection of the political landscape than the housing market itself. The human side of this story is that people are left without affordable housing, living in unsafe or overcrowded homes, or unable to live in the cities at all. In 2024, SME developers have the potential to play a critical role in reforming and rebuilding the residential housing market.
What will house prices look like in 2024?
The most recent ONS figures for September showed that house prices across the UK fell annually for the first time in a decade. However, Scotland bucked this trend – continuing its tendency to be less volatile in comparison to England and Wales. The data showed that average house prices in Scotland grew by 2.5% annually to £195,000 against a 0.5% decrease in England, where the average HPI stands at £310,000.
Whilst Scotland’s housing market might be less volatile, it is facing its own unique set of challenges that require a strategic approach to close the gap in ensuring that supply can meet demand.
A strategic approach
The primary issue sparking the housing crisis in cities such as Edinburgh is the lack of land to build on. Ostensibly there is less and less space in the city and therefore fewer options for curtailing the rapidly expanding chaos of the housing crisis. But this is far from the truth – and it is now time for thinking more strategically about how we regenerate and convert existing developments.
Glasgow stands testament to the possibilities of a creative approach; there has been a sizeable increase in affordable homes as a result of regeneration projects. In part, this is due to the nature of the city, which has more brownfield sites that are well-placed for conversion. However, this approach could be scaled up on a national level. For example, by repurposing unused industrial sites, in areas where brownfield sites are scarce. SME developers are perfectly positioned to lead the regeneration projects that Scotland’s cities are in dire need of.
Furthermore, Atelier has witnessed firsthand at its recent Lending Update event in Edinburgh that there is a hunger for a strategic approach that is tailored to local needs. This ultimately comes down to having the right product in the right location. However, in order to fix the housing emergency, SME developers require more flexible financing solutions to allow them to undertake these local developments.
Human impact
It is no coincidence that the cities of Edinburgh and Glasgow – which both declared housing emergencies – are also major student cities. The lack of affordable housing for students is particularly challenging and is having a significant impact on young people.
A survey by Slurp revealed that (excluding first year students coming from outside the city of Edinburgh, who are guaranteed accommodation) a sixth of students in Edinburgh did not have tenancy agreements by the 18th September 2023. To some extent, this is out of the control of developers, with universities welcoming an increasing number of students, which is disproportionate to the amount of accommodation available, in a bid to raise revenue streams.
Purpose Build Student Accommodation (PBSA) developers face a range of obstacles in the planning process, which has led many projects to stall. However, the right developers, with a strong understanding of local needs, could lead regeneration projects to fix the supply issues which have a stranglehold over the building of appropriate and well-located student accommodation. PBSA regeneration projects in key strategic locations will also have a beneficial effect on the rest of the residential market.
The Scottish housing market is in urgent need of attention to address its housing emergencies. With more flexible financing and planning solutions, SME developers can regenerate Scotland’s cities.
2024 is the year to re-imagine what Scotland’s housing market can look like – with a strategic approach that makes use of brownfield sites and industrial spaces. Whilst an affordable housing market will not emerge overnight, it is time for a reenergised approach, rather than prevaricating and leaving the Scottish public to carry the can.
