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Landlord returns boosted as Scottish rents rise

We haven’t used our blog to report on the Scottish rental market for a while now and as we enter the summer months – a traditionally busy period for landlords and letting agents – we thought now the perfect time to post an update.

After sifting through all the Private Rented Sector (PRS) reports published over the past few weeks, the headline figure we’ve picked out is that average monthly rents in Scotland peaked in May, reaching £544. This represents a monthly rise of 1.0%, according to a report from a Scottish letting agency chain.

What’s more, the same report highlights that annual rental growth has accelerated to 2.7%, the fastest year-on-year increase recorded since last summer, when the property market’s post-recession resurgence was at its peak.

Letting Solutions June 2015 Blog 2

These high rent figures are eclipsed by those published in HomeLet’s latest rental index, which places Scotland’s average monthly rent in the three months to May as £632, a 2.7% increase on the previous month’s effort.

So, it’s quite clear that market growth has bounced back after the winter months, but what does this mean for landlords and their finances?

Well, taking into account property price growth and void periods before any mortgage or maintenance costs, the aforementioned report places the average total return on a buy-to-let property in Scotland at 17.3% in the twelve months to May. This has almost doubled since the same period last year, when the figure was 8.9%.

Taking a look at the maths, this equates to a return of around £27,400 (£5,900 in rental income and £21,500 in capital accumulation) for the typical Scottish landlord.

Interestingly enough, although it comes as no surprise to us here at Letting Solutions, these double digit figures boost Scotland’s appeal as a buy-to-let location when compared with typical yields in England and Wales which are currently around the 9.5% mark.

One caveat – and it is something that many Scottish agents feel very strongly about – is the possible introduction of sector reforms which will most certainly affect market growth like that which we have experienced recently.

The government’s reforms, particularly the loss of ‘no fault’ ground, if introduced could force a high number of landlords to leave the sector and potentially push rents out of affordable reach for tenants.

At the moment, however, tenant finances have remained stable, meaning that landlords are still able to reap the rewards of rental increases like those detailed above. The proportion of Scottish tenants in rent arrears in May was 8.8%, down from 9.2% – a significant improvement.

However, there is still some way to go to get back to the level recorded last May when just 6.4% of Scottish tenants were behind on their rent payments.

All in all, though, the signs are very promising and as next year’s student tenants start to think about accommodation and more families look for rental properties, tenant demand will increase and becoming a landlord will remain a profitable life decision.

For more advice on renting your property, the first dedicated letting agency in West Lothian, Letting Solutions, would be delighted to help you. Please get in touch on: 0845 520 1420.

What’s more, our instant rental valuation tool can give you an idea on how much your property could fetch in monthly rents.