Major Scottish housebuilder sees early signs of return in homebuyer confidence as inflation eases

The firm said the fundamentals of the housing market in Scotland remain strong.

Springfield Properties, Scotland’s only listed housebuilder, said it had seen early indications of a return in homebuyer confidence as it assured investors over its full-year results.

In a trading update, the firm said that while there remains uncertainty in the near-term market, it is confident of meeting market expectations for the current year, to the end of May 2024, helped by a “significant” contribution from land sales. Bosses said they had been encouraged by the early indications of a return in homebuyer confidence north of the Border, with inflation easing back and the Bank of England holding interest rates for two consecutive months.

Build cost inflation continues to moderate, Springfield noted, while there is greater availability of materials and subcontractors. The interest that the group is receiving in its land bank - and at “attractive” valuations - reflects the market preparing for an upturn in trading conditions, the firm added.

A view of part of the Bertha Park Village housing development on the outskirts of Perth, in which Springfield is involved. Picture by Alan Richardson

The more upbeat comments contrast with September’s 2022/23 results statement. The group saw its shares hit after it announced plans to suspend dividend payments and despite the business taking “decisive” cost-cutting measures in the face of a challenging housing market and rising debt.

In its latest update, Springfield said trading in the first half of its new financial year had been in line with management expectations. Demand in private housing remained “stable but subdued”. Two profitable land sales were agreed in the period, for a total of £9.3 million, with funds to be received by the end of the financial year.

Build cost inflation continues to reduce, the firm added, and is expected to be in the region of 4 per cent for the first half, while there is greater availability of materials and labour. The group is confident of meeting market expectations for the full year.

Springfield told investors: “The fundamentals of the business and of the housing market in Scotland remain strong. There is an undersupply of housing across all tenures, which is becoming more acute - as evidenced by three local authorities, including Edinburgh and Glasgow councils, recently declaring housing emergencies.

“The group offers high quality, energy efficient homes in popular locations across the country and it has an excellent track record of delivering developments exclusively dedicated to affordable housing. This is further supported by the group having one of the largest land banks in Scotland, with circa 6,500 owned plots and strategic options over a further 3,255 acres, equating to circa 33,000 plots as at November 30.”

September’s results for the year to the end of May 2023 showed that overall revenue was up 29 per cent to £332.1m, with strong growth in private housing reflecting the twin acquisitions of Tulloch Homes and Mactaggart & Mickel Homes. Affordable housing revenue fell by 16 per cent, however, and group profit before tax was down 22 per cent at £15.3m. The company finished the year with net debt of £67.7m, up from £38.1m previously. The group’s net bank debt stood at around £94m as of the end of last month.