Savills Research Takes Stock Of Recent Turmoil And Looks Ahead To Recovery

Savills Scotland has issued its Residential Development Focus (Winter 2008/09) reviewing activity for new home developments and land values over recent months and focusing on the road to recovery.

According to the property specialists, the price of new homes fell faster and further than the mainstream UK market. Peter Allen, a Director of Savills Scotland said: "In many parts of the UK we are typically now seeing new flats selling for 20% less than they were at last year’s peak, with little premium over the second-hand market.

"Some oversupplied regeneration markets are showing higher falls. New houses are generally selling for 15% less than peak, with the higher falls in areas where certain house builders have been achieving better rates of sale through aggressive sales strategies."

Industry body, Homes for Scotland, indicates that levels of new build reservations began dropping dramatically in March 2008. While demand and 'foot fall' remained at a reasonable level, potential buyers struggled to secure mortgage finance.


The Savills research reveals development land values to have fallen by some 40% across the UK. However, although build costs are falling as the global economy slows, developers still need to meet the escalating costs of higher sustainability standards. Allen continued: "If a site needs significant developer spending on roads, schools and other infrastructure projects, as so many of the large sites in the pipeline do, then today’s market means that the residual value of a site is marginal at best."

Allen sees the likely easing of planning requirements as an obvious route to making sites viable. He said: "We can anticipate substantial changes to policy in order to deliver new housing of all tenures, including much needed affordable housing. This is likely to include easing of Section 75 constraints, Scottish Government funding of infrastructure and joint venture development in partnership with the private sector."

Against this backdrop, Homes for Scotland predicts just 12,000 new home starts this year. This is around half the total annual average of Scottish output, and leaves the timescales for the Scottish Government's target of 35,000 new homes per year by 2015 in tatters.

Allen concluded: "It is currently a gloomy situation but we continue to expect a turning point in the market and the recovery to begin by 2010/11. The Government's intervention looks set to ease liquidity, slowly improving mortgage availability."

(GK/JM)