LANDLORDS in Scotland have not yet begun to pass the costs of interest rate rises on to tenants, according to detailed research by letting experts Citylets.
With four interest rate rises between Q2 2006 and Q2 2007, higher than normal rental growth may have been expected with landlords passing on the increased borrowing costs resulting in higher rents.
However, analysis of data from more than 45,000 properties advertised on www.citylets.co.uk by more than 200 letting agents has shown that rental prices have remained stable despite the rate rises.
The modest increase of 0.6 per cent from Q2 2006 indicates that, in general, landlords have not increased rents in response to higher interest rates.But experts at Citylets, which is Scotland’s most successful residential letting website, have warned that this may not remain the case for long with more interest rate rises expected.
Thomas Ashdown, managing director of Citylets, said: “It would seem that, for the time being at least, the majority of landlords have kept rental prices where they are, despite the increased cost of borrowing.
“There is, of course, the possibility that the demand in the market will simply not support price increases However, it is worth noting that May07 saw record levels of visitor traffic to our site
In Aberdeen rents continue to sparkle with one bed flats up 15% and two bed flats up 12.5% on the same quarter last year. Rather than a response to interest rates, this increase is attributed to extremely high demand for a limited supply of rental properties in the North East. While property prices remain high, the local economy and oil strong, it is likely rents will continue to grow.
High demand was also seen in Edinburgh for larger 4 and 5 bedroom properties in the second quarter as students scrambled to secure a property for the next academic year. 42% of 4 and 5 bed properties in Edinburgh marketed on Citylets let within 2 weeks bucking the trend that larger properties are normally slower to let.
Edinburgh’s average rental price of £736 is virtually unchanged on last year but strong seasonal fluctuations are evident throughout the year.
Glasgow continues to see the lowest average rental prices in Scotland at just £571, again virtually unchanged from 2006. Larger properties aren’t experiencing the demand as in Edinburgh with a large part of the student population – reportedly second only in size to London – local to Glasgow and living at home.
The Q2 2007 report is Citylets’ second quarterly report on Scotland’s residential letting market. It is the first time a detailed picture of the rental market in Scotland’s three major cities has been available.
Citylets was pioneered by Thomas in 1999. It is Scotland’s first and most successful dedicated residential lettings portal and has now successfully expanded into the Northern Irish market.