Springfield Properties has said it is ready to “press the accelerator” on its private rented sector (PRS) activities, should Scotland’s rent freeze be lifted next March.
Reporting pre-tax profits up 10% to £19.7 million and the delivery of more than 1,000 homes for the first time, Elgin-based Springfield added it had “temporarily paused the signing of new long-term fixed price contracts until appropriate inflationary accommodations are introduced.”
Revenue and margin on affordable-only sites was also impacted by cost increases relating to three subcontractors going out of business and the contribution from two large, fixed-price, long-term contracts signed in early 2020.
Chief executive Innes Smith said: “We were just about to sign a contract with Sigma (Capital Group) for 300 private rented sector houses and the (Scottish) government announced a rent freeze.
“We understand the freeze (in place until at least March 31 2023) was made because of the cost-of-living crisis and the need to stop rents going out of control.
“One consequence of that is the PRS partner we had has decided to pause its investment up until the rent freeze is removed.
“The problem is the 300 houses we would have been building – we won’t be building now – and building fewer homes is not going to help the housing problem.
“The reality of that decision is fewer houses will be built and fewer energy-efficient houses will be coming onto the market.”
Ultimately, we want to be building more houses.”
Innes Smith, chief executive, Springfield Properties.
Springfield’s boss said he hoped the UK Government decision by cap domestic energy prices for the next two years would allow the rent freeze to be lifted and let “the market operate as a free market.”
He added: “Obviously, that is outside our control and it is not a decision by us. We still have the land available for PRS housing – we are ready to press the accelerator as soon as the market returns, which we hope will be in March 2023.
“It will be an upside for us because we have taken these figures out of our projections. Ultimately, we want to be building more houses.”
The two sub-contractors who went bust were window suppliers.
Mr Smith said it was a “very difficult environment” for sub-contractors just now, due to rising fuel, energy and materials costs.
“I think you are going to find companies loath to sign any contract over six months in the current environment,” he added.
Inflation to be less than predicted
Springfield acquired Inverness-based housebuilder Tulloch Homes for £54.4m during the year to May 31 2022.
The company also reported a record 1,242 completions and revenue growth across the business.
Some 712 private homes were completed, up from 559 a year earlier, reflecting the acquisition of Tulloch Homes and organic growth.
Affordable housing
In terms of affordable housing, 405 homes were completed, up from 363 previously, as the group delivered against its highest-ever contracted order book,.
Mr Smith issued a plea for more new homes to be built Scotland-wide.
“We don’t build enough,” he said, adding: “Until we cure this problem supply is not meeting demand.
“We are talking about doing things to improve the environment – our houses are four times more efficient than a Victorian house.
“We are pressing pause on our affordable-only sites and again that will result in fewer houses being built. It will exacerbate the housing supply issues so we are hopeful in November, when the government comes to look at the benchmark price, that we will be able to get back and get those sites up and running again.
“It is challenging times, we understand. This is a blip and we are very confident things will recover, because we believe the (Scottish) government when they say they want to build 110,000 affordable houses.”
The group has also established a new partnership with Aberdeenshire Council and joined the Supplier Network of hub South West Scotland.
Dykes of Gray development
Springfield has also designed its Dykes of Gray village near Dundee, with a mix of two, three, four and five-bedroom homes. Once complete, the development will include around 1,500 energy efficient homes. There are already more than 300 homes occupied.
Mr Smith said: “A public bus service now runs through Dykes of Gray connecting the new village with the city.
“Having allocated land for a new primary school as part of our masterplan, we are pleased to note progress on that front too.
“Consultation on proposals for a new primary school for the village is currently taking place.”
In contract housing, where the group provides development services to third-party private organisations, 125 homes were completed during the 2021-22 trading period – up from 51 a year earlier.
Springfield also acquired Scottish housebuilding business of Mactaggart & Mickel during the reporting period.
The move expanded the Moray group’s footprint in areas with a higher price point and included a timber frame factory near Glasgow.
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