The Scottish Rental Market, Q4 1st Feb 2016
Citylets have observed that in the final quarter (Q4) of 2015 (October – December) growth has slowed in comparison to Q3 with rents falling slightly from £757 to £747. However there was a last minute end of year surge with rents up 0.4% in December alone – this is the highest monthly rise since June (Your Move). The national average has increased 2% on the same time last year.
Growth continues to be seen in Edinburgh and Glasgow, however Aberdeen has experienced significant drops. Annual growth in Edinburgh stands at 5.7%, and is now the most expensive city to rent, with rents averaging £951. This growth is slightly less than the 7.5% seen last quarter but it is still very impressive.
Your Move revealed that the usual seasonal spike for rent arrears around Christmas did not happen this year, with tenant arrears dropping through November and December. The proportion of rent in arrears fell to 11.9% of all rent due in a month (arrears peaked at 13.8% in October). This is a welcome decline, especially as overall arrears have climbed in 2015, up 7.2% compared to December 2014.
In Scotland, the average gross yield on a rental property was 4% in December 2015, consistent with previous months. Your Move have identified the average landlord in Scotland has seen a return of £10,000 over the last year, before any costs such as maintenance or mortgage repayments are incurred. This can be broken down into rental income totalling £5,900 and capital appreciation of £4,100.
There continues to be a shortage in the supply of rental properties while tenant demand is increasing. Properties are letting in record breaking times, voids are minimal and rents are good. An improvement in average earnings is making rents more affordable for tenants, although the additional stamp duty on buy to let properties may affect things for renters in the long run. The first quarter of 2016 is likely to be distorted as investors buy before the introduction of the 3% tax, however for now the Private Rented Sector is continuing to thrive.