Scotland is famous the world over for a number of things – including kilts, shortbread, haggis, whisky, Trainspotting, Robert Burns, Hogmanay, the Edinburgh Fringe and William ‘Braveheart’ Wallace. In recent years, though, it has become an increasingly attractive proposition for landlords and property investors eager to achieve healthy rental yields.
A combination of high tenant demand and reasonable average property prices means landlords can secure sustainable investments, while good rental yields are more achievable because the cost of purchasing a rental home is often lower than in other parts of the UK.
By comparing the respective capitals of England and Scotland, we can see the stark difference in property prices. Edinburgh, a tourist hotspot and the most expensive city in Scotland, still only has an average house price of around £200,000. By contrast, the average property price in London is much steeper at almost £500,000.
Glasgow, Scotland’s second city and famous for its football, art and shipbuilding heritage, has an average price of around £125,000, making it one of the most affordable major cities in the whole of the UK.
In Livingston, West Lothian’s largest town, the average house price also falls into the affordable bracket (£150,000), while demand for rental homes is strong. Many of the towns and villages on the outskirts of Edinburgh, including West Calder, Blackburn, Broxburn, Bathgate and Linlithgow, act as popular commuter hubs, with families and young professionals opting to rent in these locations and then commute in to either Edinburgh or Livingston.
What’s more, West Lothian College – a further education establishment based in Livingston – and the University of Edinburgh are both home to thousands of students, many of whom look to rent.
In other words, West Lothian and the wider Edinburgh area are a rich source of potential tenants and landlords and investors who invest here can feel confident in filling rental properties with relative ease.
Many English investors are now looking towards Scotland, which currently has more available stock and the bonus of reasonable asking prices. One or two bedroom flats tend to have the widest appeal as they attract the broadest range of tenants, but family homes with three bedrooms are increasingly popular. The exact location of the property is, however, critical.
For landlords and investors, it’s important to have a good understanding and knowledge of the local market and what makes it tick. If you are looking to invest in certain areas, it’s a good idea to know the level of demand beforehand and what types of rental home are particularly desirable. This is something a local letting agent can help you with, using their experience and local market knowledge to provide a thorough overview.
At Letting Solutions, West Lothian’s first dedicated lettings agency, we can do exactly that, offering prospective landlords and investors tips and advice on how to get the most from your rental properties.
We know the places where good rental yields are most achievable, where demand is high and consistent, and where a healthy return on investment is possible.
Furthermore, landlords who are new to the Scottish rental market need to be aware that different rules apply to the rest of the UK when it comes to legislation. For example, new landlords will need to adhere to a legionella risk assessment, an electrical installation condition report (EICR), a portable appliance test (PAT), carbon monoxide detection, smoke detection, gas safety certification and an energy performance certificate (EPC).
Stamp duty in Scotland is also now known as Land and Buildings Transaction Tax (LBTT), which – like the rest of the UK – is linked to the purchase price of a property. New Scottish LLBT rates, which rise in line with property prices, were implemented in April 2015.
Unlike the rest of the UK, though, buyers pay tax on amounts between bands, not on the full purchase price of a property. For homes that cost less than £145,000, for example, the rate is 0%, while for a home worth £750,000 or more the tax is 12%.
The extra 3% stamp duty surcharge on second homes and investment properties applies in Scotland, too, as do the restrictions on mortgage interest tax relief. The wear and tear allowance has also been scrapped.
In Scotland, all landlords are also subject to mandatory registration to ensure those letting houses are deemed ‘fit and proper’ to be letting property.
There are future challenges faced by Scottish landlords and investors – including upcoming tenancy reform and a possible roll-out of the controversial Right to Rent scheme – but on the whole the outlook for landlords and investors in Scotland is positive.
If you’re concerned about demand diminishing, recent research from Knight Frank will offer you plenty of reassurance. Far from demand for rental homes retracting, their recent Multihousing Report found that the number of households living in the private rented sector will increase to 24% (5.79 million) by 2021. This is up from 21% (or approximately five million) as things currently stand.
It’s far from the only piece of research to suggest that demand for rental homes is set to soar, with low supply, high house prices and high deposits all making buying a house more difficult. Instead, many people are looking to rent for the long-term, attracted by the flexibility this offers.
For more information about what we offer, please get in touch with us on 01506 425693.
We also provide free instant online valuations to give you an idea of how much your rental property could be worth in the current marketplace.