Aberdeen new house prices “not a bubble about to burst”

Post Thumbnail

Cala Group revealed its profits have more than doubled on last year as margins on homes sold increased to a “record” level.

The house builder said although the number of homes it built was “broadly unchanged” on the prior year – 677, down from 694 in 2013 – house sales gross margin was up to 22.7% from 18.8%.

Alan Brown, Chief Executive of Cala Group, denied that the fatter profits were all due to putting prices up.

Instead, the increase was due to both a rise in house prices as well as developing less on land acquired at the height of the market before 2008.

He said: “The gross margin increase is more about developing less legacy land than it is about putting prices up.

“It is about getting rid of the sites that were bought pre-2008 and developing on the newer sites that were bought on a higher margin.”

Cala revealed its average selling price in its most recent financial year was “significantly higher” at £423,000, compared to £335,000 in 2013, but that this was due to a change in site mix, sales inflation, as well as the higher value homes it is building in the South East following its acquisition of Banner Homes last year.

Mr Brown said that prices for new homes sold by Cala were rising in “low single digits” across all sites, although he added that Aberdeen house price inflation was “a bit more than that”.

“Aberdeen is a micro-climate in terms of economic activity at the moment. There’s record amounts of inward migration. A lot of new professionals taking up space.

“The thing about Aberdeen is it has actually had a shortage of housing for a number of years which is slowly beginning to be solved.

“We would prefer a low-digit selling price across the board in Aberdeen. But we don’t see it as a bubble that is in anyway about to burst.”

Earlier this year, the firm’s re-launched north-east division, Cala Homes (North), said it planned to double turnover in the region to £60million by 2016, as it unveiled plans to develop 15 sites in areas including the Granite city, Aberdeenshire, Deeside and Bridge of Don.

Yesterday the firm said the north-east division had blown through its own predictions, with 2014/15 turnover now expected to hit £38million and £71million by 2016/17.

Managing director Mike Naysmith said the firm had recently doubled the size of its offices at the Arnhall Business Park in Westhills and had taken on 15 new staff, taking the total headcount to 44.

Mr Naysmith said: “New premises were urgently required to enable us to continue our rapid expansion, so we sourced new offices that are more than double the size of our previous location.

“Our growth plans are well on track and as well as delivering the developments we set out to when we launched in July, we are seeking out land in desirable locations to bring under contract.

“We are also still recruiting and would encourage talented architects, development surveyors, site managers, sales executives and administrators to get in touch.”

He added: “Cala was founded here in Aberdeen in 1875 with the formation of the City of Aberdeen Land Association, so we have a long and successful heritage in the city.

“We now have ambitious plans for the region, which we feel are absolutely achievable given the rate at which we are already expanding, both in terms of staff and milestone developments.”

Revenues across the group rose 22% to £294.2million in the year to end of June 2014, while pre-tax profits rose 117% to £27.3million, Cala said.

Breaking