Springfield Properties has announced that it is unlikely to build homes for the private rented sector for two years, following the Scottish Government’s temporary rent freeze.
Coming in next spring, it was included in legislation rushed through parliament recently to protect tenants from rising costs. However, many of Scotland's property and construction firms complained of not being consulted, with several putting developments and investments on hold.
In a trading update for the six months to the end of November, the Elgin-based group also stated that industry-wide inflationary pressures in materials and labour have become more acute as supply chain disruption has persisted and 7.5% inflation has been applied to future costs for the second half.
Private house price growth is also no longer anticipated in the short term, rendering the increase in build costs more difficult to mitigate.
"The group’s affordable housing business continues to be impacted due to the industry’s model of fixed price contracts and with the Scottish Government yet to review its affordable housing investment benchmark," read the statement.
Scotland's only listed house builder therefore continues to hold off from entering into long-term fixed price contracts in affordable housing.
"These factors are expected to combine to impact the group’s margin and, as a result, the group now expects to report profit before tax for full year 2023 below that of full year 2022."
As noted in Springfield's final results on 20 September, the business has a strong order book and sustained demand in private housing, but against a challenging market backdrop.
"Since then, the rise in interest rates and broader economic uncertainty have impacted reservations for the group’s private housing," the update noted, adding that current financial year revenues are largely protected by the Scottish missive system, which ensures that customers are contracted into the purchase much earlier in the build programme.
"However, cognisant of the continued market uncertainty, the board is taking a cautious approach to expectations of future sales rates."
The group is focused on maintaining tight cost control during this volatile period, while the historic investment in the land bank - half of which has planning permission already granted - "provides visibility and a platform from which to take advantage of the next upturn in the market cycle".
Further details are set to be provided in Springfield's interim results announcement, expected to be published in February.
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