Scottish Housing Market Review Q4 2024

11. Lending to House Builders, Insolvencies and Construction Prices

11.1. Lending to House Builders

The value of outstanding loans in November 2024 was 8.9% higher than in November 2023 and 19.8% higher than in November 2022. After accounting for CPI inflation between November 2022 and November 2024, in real terms there was an increase in lending of 12.4% over this period.

Source: Bank of England

11.2. Insolvencies

The number of construction companies registered in Scotland which entered insolvency increased between Q1 2021 and Q3 2023, likely due in part to increases in new-build construction-output prices (as shown in Chart 11.3), but since then the trend has flattened out around pre-covid levels – the 53 insolvencies recorded in Q3 2024 is similar to the 2019 quarterly average of 53. In contrast, the number of insolvencies of construction companies registered in England and Wales remains above pre-covid levels (see Chart 11.2).

Source: The Insolvency Service

11.3. Output and Input Prices for New Housing

ONS construction-output price data shows that the index for new housing, which covers a range of costs associated with building new public and private housing (including materials, plant & labour, and profit mark-up), increased by an annual 2.4% in September 2024, falling from a peak of 12.2% in June 2022.

Data from the UK Government shows that the annual growth rate in the cost of construction materials used in new house building, which had reached as high as 24.0% in June 2022, then fell to close to zero as from November 2023, although in the most recent month (November 2024) there has been a small rise to 1.3%.

ONS average weekly earnings data show that annual growth in total pay in the construction sector has accelerated in recent months, from 1.9% in the three months to May 2024 to 6.6% in the three months to October 2024.

Source: ONS and UK Government