Prices and rents in two key Scottish cities set to outperform rest of UK
2017-02-09
The two major Scottish
cities of Glasgow and Edinburgh are set to see property prices and rental
growth outperform rest of UK over the next five years, according to new
research.
Property consultancy JLL
forecasts that house prices in Edinburgh are set to grow 23.4% compared to a UK
average of 13.1% while Glasgow will also outperform the national average with
growth of 15.4%.
Rental growth in Edinburgh
is forecast to increase 20.5% and in Glasgow a rise of 18.2%, with both cities
outperforming the UK average of 17.6% with both sectors seeing demand exceed
supply.
Continued political and
economic uncertainty surrounding Brexit and a possible second referendum will
ensure that house builders maintain a positive but cautious approach, says the
forecast report.
It means there is likely to
be continued pressure on price and rental growth between 2017 and 2021,
especially in key city centres but demand for city centre living and renting is
expected to continue.
Indeed, the research points
out that during the past couple of economic downturns it has been city centre
residential markets which have proved most vulnerable due to a reliance on the
buy to let sector and the unproven nature of renters. Looking forward, JLL
expects residential property performance will be stronger in city centres than
in traditional housing.
This change has also led to
the emergence of the Private Rented Community (PRC) institutional investment
model, and JLL expects to see a number of specialist PRC developments in
Edinburgh and Glasgow over the next few years.
Despite taking a broadly
optimistic outlook for the Scottish housing market, JLL specifically calls out
the LBTT property tax as a ‘housing market thorn’ and one which is impacting
transaction volumes higher up the value curve.
The report also forecasts
that there will be 11.4 million private housing completions over the next five
years and the number of households in Scotland is set to increase by 61,000
over the next five years.
‘The challenging perception
of city centre living in recent years is likely to mean that Edinburgh and
Glasgow will lead the Scottish residential market during the uncertainties of
the next few years, despite these being perhaps most vulnerable to unfavourable Brexit effects,’
said Neil Chegwidden of JLL residential research.
‘House builders are more
pro-development now than they have been for some time. Encouragingly we are now
seeing the re-emergence of smaller and mid-sized house builders, They are
providing stiff competition to the larger and more established Scottish house
builders who have kept their toes in the market despite tougher market
conditions in recent years,’ he explained.
‘This is forcing up land
values in key locations and creating a more diverse base of developers but the
battle and scarcity for prime city centre sites is also generating
opportunities and desire to develop in peripheral locations,’ he pointed out.
‘All of this is positive
for the Scottish residential market moving forward. Let us hope that the
political and economic landscape does not undermine the drive towards a more
normal and sustainable housing market,’ he added.
According to Jason Hogg,
director of JLL’s residential team in Scotland, the industry is in a confident
and optimistic mood, buoyed by strong demand for residential in key city
centres.
‘However, there’s no
doubting that the key challenge for the year ahead is to address the shortage
of supply. It’s not simply a case of house builders increasing their outputs.
We need to create a better planning environment at both a local and national
level which facilitates this aim, increasing the supply of land and helping
rather than hindering the residential development planning process,’ he added.
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