Residential Property Trends

Iain Wardrop, Associate in Ryden's Consulting Group, examines the UK and Scottish trends in the residential market and draws some conclusions for the Clyde Waterfront area.

The current dismal performance of the UK housing market reverses 15 years of market expansion to 2007.  This expansion was fuelled by rising household numbers, underpinned by economic growth and the availability of mortgage credit.

The housing market in 2009 is affected by a slowing economy and therefore prospects for earnings and employment.  More importantly, the market is heavily constrained by restricted credit availability for both developers and prospective house buyers.  Both of these negative market influences are attributable to the ongoing recession.

Until the banking sector stabilises, the prospect of less restrictive mortgage lending is very limited.  The consensus view is that this re-structuring will continue through 2009, with the possibility of a more stable market in 2010.  To date we estimate that residential land values are down between 30%-50% from the market peak in 2007.

When the mortgage market does fully re-emerge, it is expected to be on the basis of higher deposits, lower lending multiples and stricter credit criteria.  Such conditions would support housing market activity, but would not support the high and constantly rising prices which characterised the UK housing market during the early to mid-2000s.


Scottish House Prices

In house price terms the Scottish market is holding up better than the UK's.  Mortgage affordability was less stretched in Scotland.  Scotland's house price to earnings ratio for first time buyers ratio was 3.7 in 2008 compared with the UK's multiple of 4.7 .  These multiples have decreased as lenders apply stricter mortgage criteria and house prices fall.  Moving away from the "100% mortgage" phenomenon of the credit boom, the average first time buyer in Scotland now provides a 13% deposit and the average home mover 27% .

Despite this, Scotland's housing market resilience is clearly being tested by the decreasing availability and stricter terms of credit available to buyers, which has contributed to a -20% decline in overall property sales.

One market sector of relevance to the Clyde Waterfront regeneration area which has been particularly affected by the recession is the buy-to-let sector.  This sector was particularly dependent upon mortgage finance at high loan-to-value ratios, and had a symbiotic relationship with new-build high density flats (and off-plan purchases).  Falling capital values are creating the prospect of negative equity for such investments.

Ironically, potential first-time buyers unable to secure mortgage credit are increasing demand for rented housing.  The private rented sector is likely to re-balance towards proven locations with good tenant demand and the prospect for strong rental yields.

Forecasts of UK house prices anticipate a much weaker market.  A review of recent forecasts  identifies an average expectation of a peak-to-trough decline of -25% in UK house prices between 2007 and 2010.  Market evidence suggests less of a decline in Scottish house prices.

These market conditions have created opportunities for housing associations to secure land and progress development on sites where they had previously been priced out of the market.  This has resulted in an increase in housing association activity in contrast to a reduction in the level of private sector construction.


Trends in Clyde Waterfront Key Character Areas

The following comments are based on analysis of the trends in residential property in each of the Clyde Waterfront Key Character areas. A fuller version of the research can be found in the Clyde Waterfront Residential Development Market Review.

Glasgow City Centre

Although the residential downturn affects the city centre market, it is unlikely to result in schemes being revised to accommodate different house types, i.e. from flats to houses.  The most likely scenarios are that schemes are either reduced in density/ numbers, postponed or a different commercial use is introduced, e.g. offices or hotels.

Pacific Quay and SECC

The situation here is similar to the City Centre in that the current state of the market is unlikely to result in schemes being revised to accommodate different house types.

Infrastructure work is still being progressed at the SECC including the construction of a new road layout and utilities connections.

Greater Govan and Glasgow Harbour

Housing associations are currently very active in this area with a number of developments on-site and in the pipeline.  Private sector development has slowed due to conditions.

Private house builders are finding that demand for flats has significantly reduced primarily due to restricted availability of credit.

Renfrew Riverside and Scotstoun

New house transaction rates have increased over the last three years.  This is most likely due to the significant development that has taken place at Ferry Village, Renfrew.

Signs of continuing difficulties in the market include one site where the first phase of a retirement home scheme, which has been a reasonably buoyant sector, has been completed, but subsequent planned phases (with detailed planning consent) have not started on site.  In another location, a private house builder has disposed of a site to a local housing association for significantly less than the price paid for it.

Clydebank and Erkine

This part of the Clyde Waterfront area is dominated by Clydebank.  The single largest scheme in the town is Queens Quay which has stalled due to the developer going into administration.  It is illustrative of the wider market that the only residential activity on site at Queens Quay is a development by Clydebank Housing Association.

Old Kilpatrick to Dumbarton

Recent market activity has included the developer of a centrally located waterfront site in Dumbarton submitting a revised, lower density residential scheme for planning approval than previously proposed.



Clyde Waterfront residential activity reflects general housing trends in Scotland and the UK as a whole.  While Scotland is performing better than the UK, the Clyde Waterfront area is experiencing a slow down in residential activity due to the type of development underway/ planned.

It is imperative that the public and private sectors recognise that the short to medium term negative influences on the residential market do not change the Clyde Waterfront area's underlying attributes including location, connectivity and accessibility.  The Clyde Waterfront Partnership plays a vital role in continuing to promote quality of development and creation of place.

Iain Wardrop

16th September 2009

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