This takes the average rent to £546 per month with the data from the Your Move Scotland buy to let index showing that growth has fallen from a 0.2% rise between September and October.
On an annual basis, the pace of rent rises in Scotland is also continuing to decline. November marks the fifth successive month where annual rent growth has slowed. With Scottish rents now just 1.4% higher than a year ago, the pace of annual rent rises has more than halved since the June peak when rents were up 3.1% year on year.
But the headline figures disguise rises in some locations. For example, in Edinburgh and the Lothians rents increased to a new peak of £635 per month with a 0.8% monthly rise in November.
The index data also shows that landlord total returns have increased to 6% across Scotland led by Glasgow and Clyde at 9.8% and the buy to let sector has seen its first fall in tenant arrears for six months.
According to Brian Moran, lettings director at Your Move Scotland, the market is now set for change in 2016 with an extra 3% stamp duty tax set to be in place from April and rent control proposals looming.
He reckons it will result in fewer properties available for rent which could push up prices. ‘Fresh supply is likely to be put on ice. Rents will then be ultimately be vulnerable to the shrinking pool of available homes for let. Landlords and the private rented sector have become a popular target for the Government recently but any attempts to curb investment in the private rented sector, and undermine landlords, will only have an adverse effect on tenants’ rents,’ he said.
A breakdown of the index figures shows that as well as Edinburgh and the Lothians seeing growth above average, rents in the South of Scotland climbed 0.2% and those in the South were up 0.1%.
Glasgow and Clyde saw the most significant monthly fall in rents, down 0.6% and the Highlands and Islands saw a 0.1% decrease in average rents since October.
The picture is also mixed on an annual basis, with only three of the five regions of Scotland seeing rents increase in the past year. The Highlands and Islands saw rents rise 5.8% year on year, taking the average to £569.
The next strongest annual increase was in the South of Scotland, up 3.1% and in Edinburgh and the Lothians typical rents are now 2.9% higher than in November 2014.
Compared to a year ago, Glasgow and Clyde saw the biggest drop in rents, down 1.3% while average rents in the East of Scotland were down 0.1% year on year.
After five months of successive rises, tenant arrears in Scotland fell to 12.1% of all rent due, a considerable month on month reduction in rental arrears, down from an October peak of 13.8%.
But while Scottish tenant finances have started to improve on a short term basis, the long term trend has been one of rising rental arrears. Compared to a year ago, tenant arrears have jumped from 6.6% in November 2014.
The average gross yield on a Scottish rental property was 4% as of November 2015, in line with October. However this has dipped from 4.1% in November 2014, and a high of 4.2% in June 2015.
Taking into account property price growth and void periods between tenants, but before any costs such as mortgage repayments or maintenance, the average total annual return on a buy to let property in Scotland was 6% in the year to November 2015. This is up from 5.6% in October, but is still down from 8% in the 12 months to November 2014.
In cash terms this means the average landlord in Scotland has seen a return, before any mortgage payments or maintenance costs, of £9,600 in the last year. Of this, rental income accounts for £5,900 of the total, while capital appreciation on buy to let property amounts to £3,700 in the 12 months to November 2015.
Landlords in Glasgow and the Clyde have typically seen the biggest returns on their buy to let investment, with average total annual returns in the area reaching 9.8% in November, equivalent to £13,000 in cash terms.
If house prices continue to climb at the same rate as witnessed over the last three months, the average buy to let investor in Scotland could expect to make an overall annual return of 9.9% in the next year, equivalent to £16,000 per property.
‘Just as the new Land and Buildings Transaction Tax changes will penalise new investors or landlords trying to expand their portfolios, Scottish property prices are also favouring existing landlords. Higher house prices are giving open rein to returns for those who already hold buy to let investments, while holding back growth in rental yields. But the cornerstone of reliable rental income remains,’ said Moran.
‘Entry to buy to let investment is much trickier than a year ago as tax relief has been reduced, there will soon by an extra 3% LBTT levy on second home purchases, and rent control zones and other red tape is also on the horizon. Local factors can become even more important when considering new investments and the best spots for rental yields and that’s why it pays to do your homework before you take the plunge,’ he added.
