Rents Riding High 1st Jul 2016
The latest research by Your Move reveals that rents in Scotland have hit a record high. Average monthly rents have risen by 1.3% from £542 in April to £549 in May. Edinburgh & the Lothian’s have seen the biggest annual regional rise in rents – up 12% (£69) overall.
This is largely due to the supply / demand issue, with landlords being put off from purchasing buy to let properties because of the 3% Land & Buildings Transaction Tax (LBTT). The supply issue may worsen further if landlords are driven away not only by the uncertainty created by Brexit (see accompanying newsletter article) but also by the new Private Tenancies Bill and the challenges it will bring.
Tenant arrears have increased for the third month in a row, with late rent increasing to 12.5% of all rent due in May compared to 11.6% in April. However fewer tenants have fallen into serious (2+ months) arrears. Employment in Scotland has fallen by 48,000 between February and April. There are clearly affordability issues for tenants if things continue the way they are.
This month also marks five years since the Scottish National Party gained an overall majority in Holyrood. Since then, average rents have seen a 7.9% (£40) upswing from £509 per month in May 2011. This is due to the fact that there is not enough provision of rental housing for tenants which has led to rents being pushed up. More houses need to be built – an estimated 30,000 a year (about half of this was built last year). There is a particular need for more affordable starter homes to meet growing first time buyer and buy to let landlord demand. Numbers promised in the lead up to the election are still nowhere near high enough to meet current demand. And so the pressure on the Private Rented Sector is set to continue.
Overall, the government needs to be doing more to incentivise landlords to stay in the buy to let market. It doesn’t look like enough housing is going to be built any time soon. As long as there is a chronic housing shortage and the demand continues to outstrip supply, things will remain profitable for those landlords who choose to stay in the game. And with the impact of Brexit on the economy, buy to let may well be the best investment to make, as share prices have decreased dramatically. In the end, the buy to let market will adapt to the changes.
Even in the light of Brexit, the glass is half full and investment in buy to let is still a wise choice for many. However individual circumstances will dictate this, and advice should always be sought from those in the know. The Key Place can advise and so please contact us now if you would like information on anything discussed here.