By Heather Stephen, Partner
Figures released last week by the NHBC show a 43% annual increase in new build house completions in Scotland – surely a positive sign of confidence in the new build market?
However the underlying picture in the NHBC report should be of concern to those who care about the affordability of homes in both Scotland and throughout the UK.
First the positives – new build completions in the private sector rose from 7,125 in 2020 to 10,991 in 2021, an increase of 54%. The number of completions for rent fell, to give an overall increase of 43%.
The NHBC report does not give figures for the number of “affordable” homes built last year, but Scottish Government figures suggest a falling off in the number of completions during the pandemic. “Affordable housing” is for those who cannot compete for properties on the open market and is normally delivered by Housing Associations or Local Authorities under a variety of schemes.
However, many affordable homes are constructed as part of larger housing estates where the developer is required as a condition of its planning consent to allocate some 25% of the housing as affordable housing. The construction of more private housing therefore directly increases the number of affordable houses provided for the social housing sector, helping meet targets.
A 43% year on year increase looks like a success story, but that increase is hardly a surprise given that 2020 was the first year of the pandemic. The construction industry was badly affected by lockdowns and while that was the most obvious impact on the industry, other pandemic-driven factors were also at play – including the closure of the Land Register, and delays due to absences at planning authorities and utility companies. Little wonder that 2020 saw the lowest number of new house completions in the UK since the dark days of the banking crisis.
That the industry has bounced back in 2021 is testament to the continued attraction of a new build property. As well as the obvious advantages of a new build, it generally offers buyers a purchase at a fixed price – in comparison to the “offers over” price found in the second hand market, and where on occasion – particularly in the Central Belt – properties can sell for 20-30% or more above asking price.
New build properties are not without problems, and there are sporadic horror stories in the press concerning badly built new built properties. These stories are less common nowadays – many of the leading builders have worked hard on quality control and developers now have to comply with the Consumer Code for Home Builders which sets out requirements that home builders must meet in the selling of homes and in after-sales service. Organisations such as the NHBC monitor new build properties and provide guarantees against major defects in the property. Yes, problems still arise – but they also arise when you buy a second hand property and there is little by way of redress in that situation.
The figures for 2021, when viewed in the longer term, may in fact be disappointing. 2021 saw the lowest number of NHBC registered completions – bar the “plague year” of 2020 – for many years. The NHBC report indicates that there were just over 150,0000 completions across the whole of the UK in 2021 compared to a total of almost 200,0000 at the peak of the housing market in 2007. While 2021 was also affected to an extent by the pandemic, the picture generally over the last few years has been one of a declining number of completions.
Contrast that with the ambitious targets set by the UK and Scottish Governments – up to 300,000 new houses a year in England alone were promised at one time, while Holyrood wants to build a further 100,000 affordable houses by 2032. That requires a rate of 10,000 a year, more than has been constructed in any of the past seven years. If affordable housing is to increase, then that requires an increase in the number of private new build properties - but increasing numbers to the extent needed seems unlikely in the current climate.
Planning laws are continually evolving and risk making the process of obtaining planning permission more lengthy, more complicated and more costly. And it is not only planning difficulties which are delaying new housing – new housing need improved infrastructure and infrastructure planning is a complex matter which often sees developments unable to get started – there is no point building a new house if there is no water to connect to it. Add to that a myriad of other challenges facing housebuilders – labour and material shortages, rising prices and the need to continually evolve and adapt their products to meet increasingly rigorous regulations designed to combat climate change.
In summary, the NHBC report is welcome in that it shows that one of the country’s leading sectors is bouncing back from the pandemic, but there is a long way to bounce to reach current Government targets.
Heather is a Partner at RCCW and the head of the firm’s Commercial Property Department, specialising in work for private and social housebuilders. The Department’s dedicated new build team sold over 1700 new properties for national and local developers throughout Scotland last year, considerably more than 10 % of all new build sales in the country.