An “enormous challenge” to build all the new homes needed in Scotland, says JLL

In a new report called Rising to the Challenge, leading property consultancy JLL warns that Scotland is not building enough homes to meet either current demand or the Scottish government’s current recommended targets.

Data collated in the report says that in the year to the second quarter of 2015, a total of 15,260 homes were completed, well short of the five-year average to 2007/8 of 21,170 homes a year, and even further behind the Scottish government’s current recommended target of 36,000 homes a year.

It goes on to say that the number of households in Scotland is forecast to increase by around 74,000 in the five years to 2020, of which 15,100 will be in Edinburgh and a further 10,400 in Glasgow. JLL says demand will far outstrip supply despite the recent announcement of an increase in funds for the housing industry in Scotland.

Jason Hogg, director of JLL’s residential team in Scotland, says: “2016 will be a year of challenging questions rather than unbridled forward momentum. And there are several questions on a variety of residential issues which need addressing.

“The greatest challenge is how the housebuilding industry and the Scottish government will move towards building the greater volume of homes the country needs. 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.

“2016 will also bring into play legislation that will rebalance the private landlord and tenant relationships. However, we will have to wait and see whether there are any wider market implications or whether any local authorities will use their rent cap powers.”

JLL’s research saw an average 3.5% rise in sales prices in Edinburgh over 2015, with the expectation of another 22.2% rise by the end of 2020. Corresponding average rent rises were calculated at 6.3% and 22.8% respectively. The report talks of the capital’s “sparse” hew homes pipeline and forecasts outer areas such as Leith and West Edinburgh increasing in popularity.

In Glasgow, 2015 saw prices rising 4.1% on average, and rents moving up 5.6%, with forecasts for the next five years suggesting further upward movement of 19.3% and 19.9% respectively. JLL bemoans the lack of housing in the Glasgow residential market but notes that a number of key schemes should make progress in 2016.

Hogg warns, however, that “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.”