Average private sector rents increased by 0.2% in the 12 months to May 2018 but are rising much faster in Edinburgh and the Lothians, up 3.1%, the latest index data shows.
The average rent per calendar month is now £572 with the highest recorded in Edinburgh at £677 per month, according to the figures from the Scotland rental tracker report from Your Move.
But other areas of the country are also seeing strong rental growth with the Highlands and Islands region recording an annual rise of 10.6%, taking the average rent £667 per calendar month, just £10 behind the capital.
The report says that the main reason behind rising rents in the Highlands is that demand is outstripping supply. It suggests that potential buyers are moving to the Highlands with a ‘try before you buy’ approach, initially renting before deciding to buy in popular areas like Elgin and Dingwall.
In Inverness, rental growth is mainly attributed to the University of Highlands and Islands, and also an influx of doctors from Edinburgh and Aberdeen to Raigmore Hospital. With higher demand for available properties, this has led to rental yields increasing, particularly on two bedroom properties with parking spaces.
At the other end of the scale, the East of Scotland continues to have the cheapest rents at £530, down 1.8% in the last year. The only other areas to see rents drop was the South of Scotland, where prices fell by 3.5% in the year to May to an average monthly rent of £547.
The report also shows that yields for landlords are stable at an average of 4.7% in May, unchanged from April, and slightly higher than the 4.4% average in England and Wales. The only regions of England to post stronger returns than the Scottish average were the North East at 5% and the North West at 4.8%.
‘Capital cities often attract people from all over the country and Scotland is no different. The lure of the big city has increased demand for properties in Edinburgh and rents have risen accordingly,’ said Brian Moran, lettings director of Your Move Scotland.
He pointed out that Scotland’s other big city, Glasgow, also recorded strong growth while more rural parts of Southern Scotland saw prices cool. ‘Despite these changes, landlords across all areas of the country continue to see strong returns on their investment,’ he added.