House firms face 'deep recession'

By Hayley Millar
Business correspondent, BBC Scotland

Homes for Scotland members claimed the slump was serious

Scottish house builders are heading for one of the sector's deepest recessions, it has been claimed.

The number of new houses may have fallen by more than half over the past three months, industry body Homes for Scotland said.

With sales of new-build homes also falling, the figure is likely to drop even further.

Several house builders had committed to developments they could not finance, after being hit by the credit crunch.

Allan Lundmark, of Homes for Scotland, said: "My fear is that we are going to impact on whole infrastructure of the industry and its ability to deliver.

"You could call it a correction, but it is so severe a correction that the housing market might never operate in the same way again."

This will take a long time to bottom out and, if we don't act now, we will take a long time to recover Allan Lundmark Homes for Scotland

Mr Lundmark said many of his members believed it could be the worst housing slump for several decades.

"The industry has come through two similar periods, in the 1980s and the 1990s, but this is deeper, far deeper," he added.

"In fact, it has been characterised by some of my senior members as similar to, if not worse than, the downturn in the 1970s.

"That threatened the industry in a very fundamental way. This will take a long time to bottom out and, if we don't act now, we will take a long time to recover."

Homes for Scotland has been collecting figures from its members for the past three months.

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Housebuilder on the industry downturn

The organisation said it believed the number of houses built in that time was likely to have dropped by 50%, which would make it impossible to meet government targets to build an extra 5% a year.

It would also be impossible for housing associations to meet their target of building 30,000 new affordable homes for the rented sector.

Some associations have been in talks with house builders about buying unsold stock.

Brian Gegan, chairman of the Scottish Federation of Housing Associations, said a solution had to be found in the next few months, before conditions in the housing market became worse.

The body, along with Homes for Scotland, is to meet Scottish ministers to discuss the way forward.