Queensberry Properties’ sales and marketing director, Hazel Davies looks back on a uniquely eventful year, and predicts what 2022’s impacts might mean for the housebuilding sector in 2023.
“The end of a year provides a fitting juncture to reflect on recent events, considering what lessons can be learned for the future. In the case of 2022, an early sense of post-pandemic optimism was quickly supplanted by a rollercoaster of fast-moving geopolitical events. This has materially affected everything from the housing market to the value of our salaries and savings.
“Following the gradual relaxation of COVID restrictions across Scotland last year, there was an expectation throughout the housebuilding industry that 2022 would see a return to normality. And in some respects, it did. The UK construction sector saw the highest level of output in September since records began back in 2010, standing four per cent higher than the comparable figure for February 2020. September’s figure would have been even higher without the state funeral of the Queen, which inevitably restricted on-site activity.
Political turmoil at home and abroad
“The death of Her Majesty wasn’t the only unexpected shock this year – and nor was it the most profound. Russia’s disastrous invasion of Ukraine has had a significant impact on the cost of raw materials such as iron, steel and timber. The soaring cost of fuel that resulted from retaliatory Western sanctions further increased the price of energy-intensive manufactured materials like bricks and plastics, while transportation costs spiked simultaneously.
“The subject of spikes brings us to political upheaval closer to home, with the brief (yet memorable) premiership of Liz Truss creating a black hole in the UK finances which will take years to repay. Other consequences of the disastrous mini-Budget included rising inflation, exacerbating the already spiralling cost of commodities following the Ukraine war. The weeks after the mini-Budget saw mortgage rates soaring, though the market has since settled down somewhat, with five-year fixed rate deals finally falling back well below six per cent at the end of November.
The price is right?
“Mortgage interest rate volatility has had a dampening effect on a hitherto superheated housing market. In the year to September, Scottish house prices increased by 7.3 per cent according to the latest Land Registry data, though the rate of increase is slowing markedly as events finally catch up with soaring prices. Aberdeen has been alone in seeing price falls during recent years, and this trend has continued with prices across the city down to £145,000. By contrast, prices in Argyll & Bute rose by exactly a quarter in the year to September to reach an average selling price of £207,000. In between these extremes, the figures for Glasgow and Edinburgh broadly mirrored the national rate. The wider picture reflects a continuing imbalance between supply and demand, which is only now being tempered by inflation and growing consumer caution.
“Turning to our sector of the property market, new-build sales transactions have strong for much of 2022 as the supply and demand dynamic continued to work in our favour. Sales have remained strong throughout the Queensberry Properties portfolio, with over 60 per cent of homes at our iconic Waverley Square development along Edinburgh’s Royal Mile now either sold or reserved. The popularity of this site reflects a growing desire among buyers to purchase a property in move-in condition, reducing the need to spend cash or savings on upgrading/renovating an older property.
A glimpse into the future
“That was 2022 – what of 2023? It would be foolish to make bold predictions, given the largely unforeseen events of the past twelve months. However, we do expect the inevitable recession to be relatively short-lived. House prices will likely flatten out in Scotland but the impact on values is likely to be much less notable than in other geographic locations. There should be at least a year of stable governance with no more political earthquakes, and less constitutional uncertainty than we’ve endured in recent months. Calmer waters lie ahead, even amid a period of cost-cutting and belt-tightening by companies and households alike”.
Sources
- Construction output in Great Britain – Office for National Statistics
- Price data from BBC News, various articles
- Five-year fixed rates fall below six per cent for first time since October – Moneyfacts – Mortgage Solutions
