We started the new year with the shocking news that Stewart Milne has been placed into administration.
Founded in 1975, Stewart Milne is a well-established independent housebuilder operating sites in North East Scotland, Central Scotland and North West England.
Causes of the collapse
Like many companies in the housebuilding sector, Stewart Milne faced significant challenges over the last few years of economic uncertainty. After an unsuccessful attempt to sell the business, the directors of the Stewart Milne Group appointed an administrator and immediately stopped operations at more than 30 active development sites in Scotland. The administrators, Teneo, were appointed on 8 January 2024. The Scottish Government and local authorities are continuing to assess the impact of Stewart Milne’s closure.
There are many factors which contributed to the collapse of Stewart Milne including:
- the rising cost of construction supplies,
- workforce challenges in the wake of Brexit, and
- the pandemic during which housebuilders had to put down their tools for months.
In addition, there is a slowdown in demand caused by the end of the Help to Buy scheme and the sharp increase in mortgage rates which started in the autumn of 2022.
The same factors affect the whole sector which causes concern that other housebuilders might be faced with a similar fate. The forecast for 2024 is that builder profits will fall, however most housebuilders are not facing this saddled with debt. The stable market in the past decade and the lessons learned from the global financial crisis have left the sector with strong balance sheets. Currently, there are no suggestions that other Scottish developers are in financial trouble.
What are the impacts?
With the situation developing daily, there are still many question marks for homebuyers and homeowners. Buyers who had paid deposits or were waiting on keys are placed in a very difficult position with their investments being put at risk. Many others are left living in a Stewart Milne property in the middle of a frozen building site or in a property with a long list of repairs that still need attention. It is unclear where the funds for these repairs will come from. The administrators are working to protect homebuyers and have been in discussion with the National House Building Council (NHBC) to ascertain whether NHBC Guarantees will stand following the collapse of the builder.
The costs associated with work on unfinished council homes, maintenance and support of roads which have not been cleared for adoption by the local authority and snagging bills are likely to fall at the door of local councils.
For example, Midlothian Council had entered into a deal with Stewart Milne to provide 28 new affordable homes off Edgemont Road, Danderhall, as part of the ongoing Shawfair development. The council has stated that they do not know if the homes will be built and they are waiting for further details from the administrators on prospects for the site being completed by other developers.
In East Lothian, Stewart Milne have been involved in a number of recent developments, including a large site at Letham Mains in Haddington. The council is waiting to hear about the future of roads and other infrastructure connected to the development and is bracing to cover costs which would normally fall with the developer.
We will be following the impact of Stewart Milne’s collapse on the housing market in the months to come. We hope that there will be fair and satisfactory resolution for all parties affected by this event.
For more information please get in touch with our Property Department at Gibson Kerr
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