March saw the sharpest month-on-month fall in Scottish rents on record, according to the latest Scotland Buy-to-Let Index from Your Move.
Average residential rents in Scotland dropped 0.7% in the month to March, the steepest monthly fall since the index began. This also represents the first monthly drop in rents witnessed since September 2015, when average rents were down 0.3% on August levels.
In absolute terms, this £4 drop between February and March takes the typical rent in Scotland down to £544 per month. Scottish rents have not been this low since May 2015.
This has also suppressed annual growth to just 1.1% in March – a significant downturn from 2.1% in the year to February 2016. This also takes the annual change to a thirteen-month low, on par with the 1.1% yearly increase recorded in February 2015.
Brian Moran, lettings director at Your Move Scotland, said: “Those who signed a new tenancy in March will be feeling confident they snapped up a competitive deal, and will be enjoying a little extra cash in their pockets at the end of every month. It’s been a rare break for cover and it’s unlikely to hang about for long as the Scottish rental market begins to gear up towards the annual autumnal peak. Tenants in big cities like Edinburgh haven’t enjoyed the same reprieve at all, with the ratio of supply and demand still stacked greatly against them. Investment from landlords needs to follow the tune of the jobs market and economic activity.
“Affordability is the main warning light to watch out for on the dashboard, and with the frequency of arrears on the rise once again, this reminds us of the considerable obstacles ahead. With landlords now facing an additional 3% Stamp Duty on property purchases, and the Private Tenancies Bill passed through Scottish Parliament, we’re entering unchartered territory. What we do know, is that if landlords hit the brakes and cause a roadblock of supply in the private rented sector, tenants will be the casualties paying higher rents in the longer term.”
Rents fell across the majority of Scotland month-on-month in March, with only Edinburgh & the Lothians seeing a rent rise since February.
The steepest monthly drop in rents was experienced in Glasgow & Clyde, with the average rent in March 1.5% lower than in February. In cash terms, this represented an £8 drop, taking the average monthly rent to £544.
The Highlands & Islands saw a similarly steep 1.4% fall in rents since February, and rents in the East dropped 0.8% on a monthly basis. The South of Scotland saw a more modest 0.2% dip in rents month-on-month.
Edinburgh & the Lothians was the only region to buck this trend, with the average monthly rent climbing 0.2% (£1 in absolute terms) on February to reach a new peak price of £645 per month in March.
Despite the widespread monthly falls in rents in March, the proportion of late rent in Scotland has risen for the first time since October 2015.
Reversing the recent trend of improving tenant finances, tenant arrears rose to 11.3% of all rent due in March – up from a seven-month low of 10.9% in February. This also shows a lapse from a year previously, with the proportion of late rent in March 2015 just 8.6%.
“March has seen a very unwelcome about-turn in the direction of tenant finances. Up until now Scottish tenants have been making good ground over the spring months, and paying down levels of late rent – but there’s still a mountain to climb for many households,” said Moran.
“External factors and the wider economic climate obviously have a vital impact on tenants’ bottom line and the delicate balancing act between monthly income and outgoings, but landlords on the ground can help keep a lid on affordability pressures too. Good management of buy-to-let properties and regular communication between landlords and their tenants is crucial to signpost any early concerns and avoid the likelihood of rental arrears. Tenants need properties they can afford, and landlords need tenants with a healthy grip on their household expenses, so it’s about striking a fair deal for both.”