Latest index figures reveal that average rents in Scotland rose by 2.3% in the year to January 2016. However, month-on-month rents stayed static at £548.
The buy-to-let index from lettings agent Your Move also shows that this figure is being driven by larger increases in regions such as Edinburgh and the Lothians. Here, rents were up by 6.4%.
On the other hand, rents in the East of Scotland were down 1.7% than one year ago and fell by 0.2% year on year in Glasgow.
Lesser returns
A reduction in house price growth north of the border is having an impact on landlords’ returns, which fell by 5.8% in the year to January. In better news, arrears have slipped to their lowest levels for six months, with 11.1% of tenants late paying rent in the last month. Previously, arrears had risen the Autumn to stand at a record high of 13.8% in October 2015.
Tenants’ finances though are down on twelve months ago. In January 2015, just 7.1% of all rent due was paid late.
On average, Scottish rents rose by 2.3% in the year to January 2016, equivalent to £12 in absolute terms. This represented only slight increase from the 2.2% recorded in the twelve months from December, though does show an increase in comparison to the 1.3% yearly rise seen in January 2015.
Rental patterns
Brian Moran, lettings director at Your Move Scotland, noted, ‘in different parts of Scotland, powerful interplays between supply and demand are shaping the regional rent patterns that are emerging. In popular cities like Edinburgh where the jobs market is hottest the competition to find homes means tenants have to act quickly. As a result, we’re seeing exceptional rent growth in some parts of the country while in others, lettings market activity is much calmer.’[1]
‘However, there’s also another ingredient added to the mix now,’ he continued. ‘The private rented sector is in a state of uncertainty, as landlords wait with baited breath while the Private Tenancies Bill progresses through the Scottish Parliament. Nervous landlords may be acting now before their hands are tied and they lose control of the rent they can charge. This could have prevented a seasonal dip between January and December instead of the steady picture we have seen.’[1]
Average Scottish rents up 2.3% year-on-year
Good news
Mr Moran believes that the rental increases are, ‘underpinned by good news.’ He went on to say, ‘we should also be looking at tenants’ bottom line. Arrears are falling which speaks volumes for affordability right now. With rents below their price peak, many tenants have been seizing the opportunity to move out of season, while good deals are available.’[1]
Regionally, three of the five regions of Scotland have seen rent rises in the year to January 2016. Rents in Edinburgh and the Lothians have now reached a record level of £642 per month. The 6.4% annual growth recorded in this region represents a steep increase, up by 4.8% in the year to December 2015.
This is not the only area to see record breaking year-on-year rent climbs. Rents in the South rose by 6% in the year to January and in the Highlands and Islands, rents increased by 3.7%.
At the other end of the scale, the East of Scotland saw rents decline by 1.7% over the same period.
Monthly dips
The majority of regions in Scotland saw rents slide between December and January. The sharpest drop was in Glasgow and Clyde, where rents were down 0.7%. Rents in the East of the country fell by 0.5% in January, with the Highlands and Islands recorded a decline of 0.2%.
Taking into account property price growth and void periods, the average landlord in Scotland saw a total annual return of 5.8% in the year to January 2016, before deducting costs such as mortgage repayments.
Moran concluded by saying, ‘we’re not on the home straight just yet. The Scottish unemployment rate is still above UK levels and parts of Scotland are also on the frontline of the current oil price slump. Wider economic factors will be decisive in determining whether tenant arrears continue in this downward direction.’[2]
[1] http://www.propertywire.com/news/europe/scotland-residential-rents-index-2016022411594.html
[2]http://www.propertyreporter.co.uk/landlords/scotland%C3%A3%C2%A2%C3%A2%E2%80%9E%C2%A2s-tenants-move-back-into-the-black.html