Rent growth slows in Scotland

Sarah Davidson

November 25, 2015

The average residential rent in Scotland is now 1.6% higher than a year ago, meaning the typical tenant is paying £9 extra every month than in October 2014.

After peaking at record prices in the Summer Scottish rents have been falling in recent months. But there are signs that growth is starting to rally following this autumnal dip, with residential rents in Scotland climbing a modest 0.2% between September and October 2015.

This is the first month-on-month rise in Scottish rents since July, and takes the average monthly rent in Scotland to £546, £1 higher than the previous month in cash terms.

Despite widespread recognition that tenant demand is currently outpacing supply of available homes to let, landlords believe that rent rises are likely to continue on a slower trajectory than witnessed earlier this year.

Your Move said landlords it represents expect rents to increase by just 1.4% over the next 12 months. Only a third of landlords are intending to raise their rents next year with the main motivation being to cover the cost of inflation.

Brian Moran, lettings director at Your Move Scotland, said: “While the debate rages on regarding the Private Tenancies Bill in Holyrood, on the ground in the lettings market, tenants have actually been granted somewhat of a breather.

“With the change of season has come a change in the pace of rent increases. This is giving Scottish tenants a much smoother ride than a few months ago, and there are indications from landlords that this trend will continue until 2016.

“Ultimately, rents in the private rented sector reflect what people are willing and able to pay, and are delimited by household incomes and monthly earnings – and that’s the fundamental market mechanism that is being lost in the noise surrounding enforced rent control zones and other government interventions.

“If the self-regulation of the private rented sector is disrupted, landlords will be more vulnerable to legislative headaches, and rents will find themselves at the mercy of limited supply.”

Earlier this month the Council of Mortgage Lenders, Nationwide, Aldermore and Precise Mortgages expressed serious concern about government proposals to give Scottish tenants more security.

If passed the Scottish government’s Private Tenancies Bill, published in late October, would put an end to short assured tenancies, introduce rent control zones and remove landlords’ rights to repossess on a no-fault basis.

A spokesman from the CML said at the time that lenders “continue to have concerns about some of the proposals for a new tenancy in the private sector”.

He said: “One over-arching concern is that well-intentioned proposals will have unintended consequences and discourage landlords from investing in the sector. That could lead to a shortage of property, less choice for tenants and push rents higher.”

He highlighted that there is also still some uncertainty about where rent controls would apply, and how they would operate which he said “will deter landlords”.

He added: “We are also concerned that in setting fixed rents, some landlords may not anticipate all their costs and may therefore have problems in keeping up with their mortgage payments. There is also a risk that uncertainty over costs may lead them to set rents at too high a level, to the detriment of the tenant.”

The Bill will introduce “rent pressure zones” where rents can be capped for a period up to five years if Scottish ministers deem that rents have risen “too much”.

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