It means that average rents stand at £536 per month following a 0.1% fall in January however rents in the east of Scotland reached a new record high in January after increasing 3.2% year on year.
The Scotland Buy to Let Index from Your Move, one of Scotland’s largest lettings agent networks, also shows that despite a slight monthly improvement, tenant financed are worse than a year ago with 7.1% late paying their rent.
The average monthly rent in Scotland is now 5.3% higher than at the time of the previous elections to the Scottish Parliament in May 2011. By contrast, the average residential rent across England and Wales has climbed 9.6% since May 2011, according to the index. Also, rents in England and Wales have risen 2.8% year on year.
Scottish tenants are having a much smoother ride than their counterparts south of the border, with rental prices in Scotland climbing at a considerably slower pace, according to Brian Moran, area lettings director at Your Move.
‘Despite snowballing demand for homes to let, the private rented sector has managed to shelter tenants from the worst extremes of rent inflation, and rents have navigated an affordable route broadly trailing inflation,’ he said.
But he pointed out that the overall story since the previous election papers over the different chapters we’ve experienced within this parliament. Scottish rents were largely on pause throughout 2011 and 2012, and it was the abolition of tenancy fees in November 2012 which jolted to life a sudden uptick in rents, as costs were recouped other ways. He believes that the majority of the rent growth falls in the last two years, and the tempo is just easing back into a more organic swing.
‘Housing is a policy area that impacts every one of us, and ahead of the general election tenants will have their ears on the ground to listen out for any rumbles of further changes to lettings legislation that might impact the sector. Investment in homes to let needs to keep pace with demand, and landlord confidence is an essential ointment to soothe the pains of the current housing shortage, and make rent rises an easier pill to swallow for tenants,’ added Moran.
The index also shows that in the past year, rents have risen in three out of five regions of Scotland. Rents in Edinburgh and the Lothians have increased nearly three times as fast as across the rest of the country, jumping 3.8% in the 12 months to January 2015, compared to a 1.3% annual rise for all of Scotland.
The East of Scotland has seen the second strongest annual rent growth, with a 3.2% year on year increase and in Glasgow and Clyde there was a 1.3% annual rise in average rents.
In two regions, average rents are now lower than they were a year ago. In the South, rents have fallen consistently for the past seven months, resulting in an overall 1.6% annual fall in rents. The average monthly rent in the South now stands at £483, a decline from £491 in January 2014. In the Highlands and Islands, average monthly rents are 1.4% lower than a year previously.
In January, rents dropped in three of five regions in Scotland. After strong rent inflation in the past year, Edinburgh and the Lothians experienced the biggest monthly fall, with average rents dipping 1.2% in January. This was followed by 0.2% dips in both Glasgow and Clyde, and the South.
Amidst a broad slowdown in the lettings market, only two regions experienced a rent rise in January. The Highlands and Islands saw the biggest monthly uplift, with rents up 0.9% since December. The East saw rents climb 0.6% in the month to January, reaching a new record of £528 per month.
As of January 2015, the gross yield on a typical rental property in Scotland stands at 4%. This is consistent with the previous month and down on an annual basis of 0.1% from 4.1% in January 2014.
Taking into account property price growth and void periods between tenants, the average total annual return on a rental property in Scotland stands at 7.2% in the 12 months to January 2015. This represents a decline from 7.4% a year previously, and is also down from 7.7% in December, after a lull in house price growth around the referendum.
In absolute terms this means the average Scottish landlord has seen a return, before any mortgage payments or maintenance costs, of £11,175 over the 12 months to January.
As house price growth starts to pick up again, if the value of rental properties continues to climb at the same rate witnessed over the last three months, the average buy to let investor in Scotland could expect to make an overall annual return of 5.6% in the coming year, equal to £8,918 per property.
