People like newbuilds so let’s build more, and soon

The gap between newbuild prices and existing homes has widened considerably over the last year. The latest figures show that between February 2024 and January 2025 the average price of a new build in Scotland increased by £53,939 from £281,508 to £335,447, which is a 19.2 per cent rise over 12 months.

However, over the same period the average price of an existing property increased by £8,640 from £165,388 to £174,028, which is a rise of just 5.2 per cent. All four of the major cities of Scotland showed double digit percentage increases in newbuild prices – up 20.4 per cent in Glasgow; 19.4 per cent higher in Edinburgh; 15.3 per cent more in Dundee; and 13.0 per cent in Aberdeen – the largest price increase in existing properties was in Glasgow at 5.9 per cent and 5.1 per cent in Edinburgh, while in Dundee and Aberdeen prices rose more modestly, by 1.5 per cent and 0.2 per cent respectively.

But what does this tell us about the Scottish housing market? We know that the volume of newbuild starts has been in decline and fell 12.1 per cent year on year between 23-24 and 24-25. This means that prices will continue to rise at a faster rate as demand will continue to outstrip supply in the next few years.

But there are other factors at play, both in driving the demand and increasing the prices. Newbuilds are attractive to buyers because they generally have better design with higher environmental and energy efficiency standards, making them cheaper to run than existing homes. They tend to be built in the most popular areas where people want to live and within reach of major cities and with effective access to transport and roads. These are major factors which buyers consider, and they are often happy to pay for.

But also contributing to the higher prices will be rising material and labour charges coupled with more stringent and expensive energy systems which have resulted in considerably higher build costs which have to be passed on to the homebuyer.

But what is clear is that we need many more newbuilds to be started in the coming years if demand is to be met. Newbuild sales are critical to the wider property market in Scotland and the lower volume of starts during the latest 12-month period is deeply concerning. At a time when it has never been as important for more homes to be built in Scotland it is essential that volumes increase to meet demand.

Interestingly, the scale of these price rises is a very recent phenomenon. In the five years between February 2019 and January 2024 newbuild prices rose by £57,136 across Scotland, which is only slightly greater than the total increase in the most recent 12-month period. This, therefore, is a sign that the market is undergoing a sudden transformation.

The recent rapid rise in prices is likely to be caused by a combination of a number of factors from more efficient and expensive heating systems, the rising cost of land for the most convenient locations and a shortage of newbuilds being available, all combining to create the current rapid price increases. But the solution remains the same: build more homes to ease demand and stabilise prices.