With thanks to lettings manager and general rentals supremo (!) Danielle for drawing this to our attention, proof is mounting that sadly the well-intentioned intervention of the Scottish Government into the private rental sector (PRS) is having the opposite effect of that intended in so far as impacts upon new tenants. This is very much as we and many other property experts and commentators predicted when we first heard the news of the ban on raising rents which comes to an end in two months’ time. Rents in the private sector can then rise again but only by a maximum of 3%, about a third of the current rate of inflation.
In what should make uncomfortable reading for legislators to Scotland’s Private Rented Sector (PRS), in the first quarter of existence of new legislation to freeze/cap rent rises for existing tenancies, rents for new tenancies which were unaffected by the ban on rent increases rose an unprecedented 11.9%, the highest annual rise we have recorded in our market trends for 15 years. This was due to landlords looking to off-set rising costs which they were unable to recover via rent rises on existing rental stock.
Pressures on the availability of property to rent in Scotland’s PRS continued to grow in the last quarter of 2022 sending average rents for new tenancies higher amid wide-spread industry condemnation of the new legislation, the levels of Ministerial engagement and general asymmetry of approach relative to the social rented sector where rents have been authorised to rise by up to 6%.
With concerns for supply of property relative to demand so very clearly signposted over the past year, it is surprising such policy was brought forward without clear, authoritative real world impact assessment on those it seeks to assist and arguably, this latest and unprecedented rise in new tenancy rents is a very early indication of an overall net counter-productive impact.
Low supply relative to demand has sent initial rents in Scotland up a full 11.9% over the period to average £972 per month. Edinburgh, Glasgow and Aberdeen recorded annual growth at 14.9%, 13.9% and 10.1% respectively.
The average property in Scotland takes just 16 days to let underlining the fact that property to rent is in high demand across the whole country.
In another twist, analysis by Hamptons shows the proportion of Scottish investors buying properties in other parts of Britain has more than doubled since 2019, from 2.5% to 5.3% this year, with landlords north of the border driven south by high taxes, the aforementioned ban on rent increases and evictions, plus the fact that additional Dwelling supplement (ADS) paid on the acquisition of additional properties now sits at 6% double the 3% rate paid in England. Although these bans were supposed to be short-lived, Nicola Sturgeon’s government last week revealed plans to extend the measures until September. Most Scottish landlords who are buying in England and Wales are choosing Northern England, according to Hamptons, due to cheaper prices and high yields. John Blackwood, of the Scottish Association of Landlords, said there is already a shortage of rental properties and the exodus of Scottish landlords will only make matters worse.
If you have any questions regarding the current state of play in the rental sector or are considering a foray into the market please contact danielle@maloco.co.uk
