JLL warns Scotland not building enough homes

Property firm JLL has warned that Scotland is not building enough homes to meet either current demand or the Scottish Government’s current recommended targets for homes.

In the 12 months to the second quarter of last year, 15,260 homes were built, well short of the five-year average to 2007/8 of 21,170 homes a year.

And that’s even further behind the Scottish Government’s recommended target of 36,000 homes a year, JLL said.

The number of households in Scotland is forecast to rise by 74,000 in the five years to 2020, with 15,100 in Edinburgh and 10,400 in Glasgow.

Even accounting for the Scottish Government’s latest £195 million funding stimulus, JLL believes that the forecast increase in households over the next five years “will create demand that far outstrips the supply of additional housing.”

JLL unveiled a new report on the housing shortfall — Rising to the Challenge — in seminars at its Edinburgh and Glasgow offices.

JLL predicts that the next few years will see the start of “Build to Rent” or “Private Rented Community (PRC)” developments in Scotland’s key cities.

“The greatest challenge is how the housebuilding industry and the Scottish Government will move towards building the greater volume of homes the country needs,” said Jason Hogg, director of JLL’s residential team in Scotland.

“Development activity is better than three to four years ago but still nowhere near the 23,000 homes a year target.

“The Scottish Government is allocating funds to assist, but we believe closer collaboration with the industry, more innovative and more directly beneficial initiatives as well as higher funding need to be considered if the housing shortfall is to be addressed.”

JLL said that in Edinburgh, the city centre residential sales market is buoyant with demand outstripping available supply.

On average, sales prices in Edinburgh increased by 3.5% during 2015, continuing a trend of strong growth. This is expected to increase by 22.2% in the five years to 2020.

Rental prices in Edinburgh have increased by 6.3% on average and are forecast to rise by 22.8% by 2020.

“With a growing population, Edinburgh city centre’s development pipeline is sparse,” said JLL.

“PRC developments are gaining traction, with strong demand but accommodation of this type is not being delivered at the same pace as other tenures.

“With the city centre land supply constrained, peripheral locations with good transport links such as Leith and west Edinburgh are likely to become more attractive.”

In Glasgow, prices increased by an average of 4.1% in 2015 with rental values increasing by 5.6%.

By 2020, it is anticipated that house prices in Glasgow will have increased by 19.3%, while rental growth is forecast at 19.9%.

Lack of housing continues to be a feature of the Glasgow residential market.

However, development activity has increased with a number of key schemes set to progress in 2016.

This includes the former NS&I and Cowglen Hospital site, which will provide more than 500 homes, the Candleriggs scheme in Merchant City and the proposed redevelopment of Jordanhill Campus.

Hogg added: “With some PRC schemes set to get underway in Edinburgh and Glasgow, and with more sites being considered for the private rented model, the shift in development bias towards PRC rather than private sale will be an interesting change to monitor.

“The development and private sale markets in Scotland’s larger cities will also have to adapt to the less favourable private investor environment following tax relief and LBTT changes.”