The average residential rent in Scotland now stands at £539 per month, the highest level on record after a 0.2% rise in November, says the data from Your Move, one of Scotland’s largest lettings agent networks.
But on an annual basis, rent rises are stabilising after a slowdown in growth. Average monthly rents across Scotland have climbed 2.2% over the past year, consistent with the annual growth recorded last month. The average monthly rent has increased £12 from £527 in November 2013.
This shows a considerable slackening from 3.5% annual rise over the year to November 2013. At their fastest pace, annual rent growth reached 4.3% in February 2014, according to
Christine Campbell, regional managing director of Your Move.
‘Scottish rents have been steadily edging forwards, and despite only taking baby steps, they reached a new pinnacle in November. Demand and supply are still out of kilter, and in highly sought-after employment and cultural nerve centres like Edinburgh, this overflowing competition for homes to let has topped up rent prices,’ she said.
‘But the outlook has shifted starkly from the start of this year, and annual rent rises have been trimmed back to healthier levels, as usual market forces check the rate of growth. In real terms, average rents across Scotland are only 1.2% higher than they were a year ago,’ she pointed out.
She also explained that speculation over how future rental caps or more stringent letting controls may disorientate the stable direction rents are currently moving in and any spike in rents would hurt thousands of households who depend on private rented accommodation.
‘Renters rely on landlords too. Increased investment into the sector is the only way to alleviate the strain of the current housing shortage and soothe competition for rental homes. If buy to let investment dries up, and the pool of properties to let contracts, rents will swallow the shortfall and eat into tenant finance,’ she added.
A breakdown of the figures show that rents have increased on a monthly basis in just two out of five regions of Scotland in November. The East saw the fastest monthly uptick in average rents, up 1.1% from October. Edinburgh and the Lothians was the only other area of Scotland to record a rise, with 0.4% growth taking prices to a record of £617 per month.
Rental prices dropped over the majority of Scottish regions between October and November. The South saw the greatest monthly fall of 0.3%, with average rents dipping £2 to £485 in November. Average monthly rents across the Highlands and Islands slipped back 0.2%, and have dropped 0.1% in Glasgow and Clyde since October.
On an annual basis, rents are higher than a year ago in three out of five regions of Scotland. The biggest year on year increase was recorded in Edinburgh and the Lothians, with rents climbing 6.0% in the 12 months to November. This is followed by a 3.2% annual rise in the East, while average rents in Glasgow and Clyde are up 2.5% on the same time last year.
Average monthly rents in the South are 1.2% lower compared to November 2013 and the Highland & Islands has also experienced a 0.6% drop in average rents on an annual basis.
As of November the gross yield on an average rental property in Scotland stands at 4%, consistent with the previous month. While steady on a monthly basis, this is a drop of 0.1% from a year ago, when gross yields averaged 4.1% in November 2013.
Taking into account price growth and void periods between tenants, the total annual return on a typical rental property stands at 8.4% in the 12 months to November. This has climbed considerably from only 5.6% in November 2013, but represents a fall on a monthly basis, from a 9.2% average annual return in the year to October, as house price growth stabilises.
In absolute terms this means the average landlord in Scotland has seen a return, before any mortgage payments or other deductions, of £12,913 over the 12 months to November.
‘House prices have dusted themselves off from the flurry of uncertainty which unsteadied growth before the referendum. But gross yields were hardly shaken by these tremors, propped up by solid rental income in the short-term, and with property values on the rise again, landlords will see a return to sturdy capital gains over the long term,’ said Campbell.
‘In this way, buy to let continues to stand out as a robust and lucrative investment, and confidence among property investors gives tenants plenty of reason to be optimistic too, as more investment in the sector bolsters the array of homes to let available on the market,’ she added.
The index also shows that tenant finances worsened in November. The proportion of late rent in Scotland has risen slightly from 6.5% in October to 6.6% in November. On an annual basis, this represents a more significant decline in the financial health of Scotland’s tenants, as the proportion of rent in areas has increased 0.3% from only 6.2% in November 2013.
Long term financial stability for renters rests on the jobs market. It’s not just about getting into work either but ensuring wage growth for those already in employment accelerates to the next gear, preventing more working households from straying into the red zone and in the worst case scenarios, risking eviction,’ concluded Campbell.
