The number of rental homes on the market in Scotland dropped in the first quarter of the year, while demand from people looking for property to rent increased, according to the latest Citylets report.
The Scottish property portal reports that average rents in Scotland ended Q1 2018 at an average of £780 per month, up 1.6% compared with the corresponding period last year.
“Supply in Scotland’s largest cities is pushing rental prices steadily upwards,” said Thomas Ashdown, managing director of Citylets. “Whilst the rate of annual growth has slowed in both Edinburgh and Glasgow, they have been rising every quarter for the last seven years in Glasgow and eight in Edinburgh.”
Ashdown believes that 2018 will be a telling year with tax changes and the increasing popularity of short term holiday sites likely to put further pressure on supply.
Supply of rental property, in terms of the number of properties available to rent, has been steadily reducing since its peak in 2013. Nowhere has this been more keenly felt than in Edinburgh where annual rents have been increasing, as measured quarterly, for eight full years. However, whilst the five-year average rise of 6% will be concerning for tenants, the 10 year view of 4.2% is broadly in line with the CPI+1+N proposals for rent caps in any designated rent pressure zone. In other words, the current form of rent cap would offer the highest going rate in the open market in any of Scotland’s cities on the long term view. Rents in Edinburgh are currently at an all time high of £1,062 on average, up 3.8% on last year.
Rents in Glasgow have also been increasing steadily, not as sharply as in Edinburgh but for nearly the same amount of time- 28 consecutive quarters, seven years. Q1 2018 records a 1.2% year-on-year rise to £749 on average, overtaking Aberdeen, but growth has slowed remaining in the 1-2% range down from both the five-year average of 4.4% and the 10-year average of 3.2%. The average property in Glasgow takes one month to rent, up one day on Q1 2017.
Rents in Aberdeen fell below national average for the first time this quarter however this is not likely to unduly unnerve investors as the trend towards levelling off continues. The average rental property in Aberdeen costs £736 per month, down 4.2% Y-O-Y. The average property in the granite city takes almost two months to let at 58 days.
Dundee/West Lothian/South Lanarkshire/Renfrewshire
Dundee also returned to positive growth in Q1 2018, up 0.7% Y-O-Y. The average property in Dundee rents at £614 per month and takes 46 days to let. Rents in West Lothian also posted sharp annual growth, up 4.6% Y-O-Y.
Commenting on the Scottish Market, Adrian Sangster of Aberdein Considine, said: “We believe we are seeing the first signs of a slowdown in the BTL market as tax changes from both Holyrood and Westminster begin to bite. The LBTT surcharge of 3%, which was designed to help first-time buyers by discouraging the competition of second home purchasers, does not appear to be having the desired effect. Recent research shows house purchase prices actually increased in 26 out of the 32 local authority areas. So whilst prices continue to increase it appears the supply of rented properties is falling.”