NewsArticle-09-02-2010

It could take up to ten years for Scotland’s housing output to simply return to precredit crunch levels of around 25,000 units per annum let alone achieve the Scottish Government’s ambitions of reaching 35,000 by 2015¹. This is the claim made by home building industry body Homes for Scotland as it launched its manifesto ahead of this year’s general election, declaring that not since the end of the Second World War has the country faced a bigger housing crisis.

Chief Executive Jonathan Fair (right) appealed to MPs as they enter the election season saying:

“Supply is touching all-time lows with some areas showing jaw-dropping drops in the number of private new homes being started (as high as 90% in both Edinburgh and the Borders, and 85% in Glasgow and Fife for example²), exacerbating the significant housing shortfall which existed prior to the recession.  Therefore, continued political focus on the importance of housing investment across all tenures is the order of the day.

“Whilst there are now signs of stabilization beginning to appear in the market, the situation is such that the Scottish Government’s target of increasing the number of new homes built to 35,000 units per annum by 2015 could very likely take an extra decade to achieve.

“Quiet optimism does exist but recovery depends on continued economic stability and mortgage availability throughout 2010.  Ten per cent growth from a current very low base may be possible in a single year but industry hasn’t grown out of any prior recession at more than 3% per annum over longer periods.”

Indeed, with home ownership remaining the tenure of choice for the vast majority of Scots³, Fair pointed to the ongoing difficulties in the mortgage market as the main stumbling block to recovery, particularly as far as credit-worthy First Time Buyers are concerned.   Whilst home builders are doing all they can to assist, this vital group (which the industry calls its lifeblood since every such sale results in an estimated further six transactions up the ladder) continues to face significantly tightened lending criteria and reduced loan to value ratios.

“Clearly, home ownership should be viewed as a sustainable, long-term commitment by those looking to get onto and progress up the property ladder.  However, we have relied too long on rhetoric about slowly increasing lending levels delivering tangible improvements in this area and need real substantive results now.”  

Ends

Notes to Editors:

1. Homes for Scotland modelling based on assumptions that completions will grow at either (a) 5% (based on past industry performance and highlighted by the green line) or (b) 10% (a more optimistic scenario highlighted by the purple line), the below graph shows how it could take between 6 and 10 years simply to return to pre-credit crunch levels of c25,000 completions per annum (shown by the red line) from what we believe is a 2009 low of 15,000.  



The graph also demonstrates how reaching the Scottish Government’s target of 35,000 completions per annum by 2015 (as highlighted by the blue line) could now take until 2027 to achieve.

2. Based on National House Building Council figures comparing Q3 2009 data with 2007 information.

3. Scottish Government High Level Summary of Statistical Trends (May 2009) showing 63% of dwellings in Scotland are owner-occupied.

4. Homes for Scotland represents the country’s home building industry which, prior to the onset of the credit crunch,:

-  was the largest source of private investment in Scotland and the largest user of the planning system
-  built 20,000 new homes, contributed £6bn to the economy and directly impacted the employment of 100,000 people (2007 figures)

Half the industry's directly employed jobs have already been lost and Scottish new build housing output has plummeted, presenting far-reaching and long-term social and economic consequences.

Click here to read Homes for Scotland’s “building for their future” appeal to MPs as they prepare to enter the election season.