Savills latest Quarter One figures reveal that the Covid-19 lockdown is impacting Scotland’s development sector after a positive start to 2020, pausing housebuilding and slowing the new build sales market, despite pent up demand. However the strategic development land market has been less immediately effected as it is based on longer time horizons, according to real estate adviser Savills.
Whilst many sites are now reopening south of the border, Scotland’s minister for local government, housing and planning, Kevin Stewart said: “We share the ambition of businesses to get back to work as soon as possible, but this must be done with public health and safety as the first priority.” He is chairing a series of meetings of the Restart Group, at which the housebuilding sector is represented, in order to “develop plans to get back to work safely as soon as the medical evidence suggests it is appropriate to do so.”
According to head of development in Scotland Ben Brough, the Scottish market is typified by pent up demand. He said: “Renewed confidence following the certainty provided by the majority secured in December’s general election, marked a turning point for Scotland’s land market. However, whilst this boosted market activity, it did not translate into significant increases in land values due to the continued increase in build costs and limited house price growth.”
UK greenfield land values grew a marginal 0.3% in the three months to mid-March, ahead of lockdown, to bring annual growth to 1.7%, data from the Savills residential development land index show. Urban land values slipped -0.3% in the quarter, and ticked up just 0.4% over 12 month period.
Brough continued: “Despite the lockdown, some land deals, which were already in train, are continuing and once Covid-19 restrictions have lifted, we would expect a busy second half of 2020.
“Whilst the number of consented sites sold has slowed in the short-term, activity in the strategic land market, based on longer time horizons, is continuing as more parties seek out future opportunities, underpinned by healthy fundamentals of supply and demand in Scotland’s housing market. Cash rich developers and investors are actively seeking land. Whilst some are looking for distressed land sales these are not prevalent in the market, and values are being upheld.”
Savills development team in Scotland acted on a combined £80 million of land deals across the country during the first quarter of 2020, including the sale of 482 plots and agreements on a further 1,300 units in various locations.
Ben Brough continued: “The Edinburgh market has continued to lead the way in the development market and seen the expansion and regeneration of suburbs, particularly around the south and the south east of the city. We expect to see strong activity in the West Edinburgh in the coming months with CALA and David Wilson Homes having commenced ground works for the 655 new homes at Cammo Fields, following a deal we agreed last year. We have also placed the initial phase of West Craigs under offer for over 400 new homes and welcome the successful planning outcome for Murray Estates with 1,350 units as Phase 1 of Edinburgh’s Garden District now with a Minded to Grant planning permission.
“While Covid-19 will have an impact on the timing of the delivery of these new homes, Edinburgh has had a fundamental undersupply of housing and this delivery will help to support the future demand.”
Head of development for Savills Aberdeen, Graham Reid said: “A number of national housebuilders looking to enter the Aberdeen market, coupled with an increase in demand from active players looking to increase their outlets, was feeding a growing optimism in the city land market at the start of the year. While the current pandemic has resulted in a pause, the expectation is that housebuilders will continue to take a longer term view on the city’s recovery. Aberdeen has shown resilience to micro and macro-economic challenges in the recent past and is proactively diversifying the economy and attracting new investment.”
Head of development for Savills in Glasgow, Jamie Doran said: “Glasgow’s residential development market has been on an upward trajectory with demand for sites outstripping supply, resulting in multiple offers at closing dates. Prime locations have seen greatest activity with recent site in the West End and South Side particularly sought, with a range of bidders including residential, retirement and care home developers offering above expectation. Pent-up demand is continuing through lockdown and we are currently marketing another site suitable for apartments at Charlotte St just off Glasgow’s Merchant City which has generated good interest prior to a closing date being set. In general terms there is strong demand for sites across the Glasgow market.”