Landlords across Scotland are among the few people seeing benefits from the credit crunch, with demand for rented property being fuelled by economic uncertainty.
Scotland’s only detailed study of the rental sector has shown that both demand and rental prices rose in the final quarter of 2007 – with evidence suggesting that growth is set to continue.
The Citylets quarterly report, Trends in Scottish Residential Lettings, has become a highly respected tool among investors, landlords and letting agencies recording recent market activity – and making forecasts. It is based on 25,000 annual lettings through 200 agents.
Its latest report for Q4 2007 showed an increase in rents, homes being let more quickly and increased tenant demand – all helping to drive up the base index of Scottish rents by 2.6% on the same period in 2006.
Thomas Ashdown, managing director of Citylets said: “In the last report we predicted tighter credit criteria and slowing house price growth would lead to higher tenant demand and from mid-November this turned out to be the case.
“We’ve just seen our busiest January ever, with visitor numbers 41% higher than in 2007. The evidence strongly suggests that although Scottish property price growth remains positive, many would-be-buyers are playing it safe for the moment and are happy to carry on renting.
“The next three to six months are likely to be extremely busy for landlords and everyone else in the letting sector. Overall that should be good news for them, but like everyone else they’ll be hoping it does not develop into full blown recession.”
Scotland’s rental property pace setter continues to be one bedroom flats in Aberdeen. The oil boom has seen demand far outstrip supply so that the average rent shot up to £561 – almost 19% up on the previous year and 6.2% up on the previous quarter.
The clearest indicator of demand in rental property is the Time To Let (TTL) – the report shows the average TTL for one bedroom flats in Aberdeen was just 12 days – with almost half snapped up within a week of going on the market and a remarkable 95% let within a month.
However, a sign of a possible slowdown in energy sector employment may have contributed to a slight drop in demand for two bedroom properties in the Granite City. The spikes of high demand seen in Q4 of 2005 and 2006 have not been repeated – indeed average two bed rents dropped 1.2% on the last quarter.
In Edinburgh the average rent for a one bedroom flat at the end of 2007 was £518, an increase of 4% on the previous year. The average TTL was just 19 days, with 28% gone within in a week and a healthy 79% snapped up in a month.
Two bedroom properties also recorded year-on-year growth of 3.7%, putting average rents at £669. Two bed flats in the capital took an average 27 days to let (24% let within a week and 64% within a month).
Scotland’s biggest city also finished 2007 with a period of healthy growth. Average rents for one bedroom properties in the final quarter of the year were £439 – up 3.5% on the 2006 figure. The average TTL – while slower than Aberdeen and Edinburgh – was still only 29 days (with 15% let within a week and 60% within a month).
Modest growth was also recorded in Glasgow’s two bedroom sector, where average rents were £578, an increase of 1.6% on the previous year’s figures. The Average TTL was 37 days, with 14% of flats claimed in a week and 50% within a month.
Thomas added: “Across the board the rental market is in good shape and the volume of lettings at the end of 2007 was higher than the previous year, with 54% of all properties marketed by Citylets rented within a month.
“What seems in little doubt is that landlords and letting agents had a healthy finish to 2007 – and so far a phenomenally busy January. We see no reason why that should abate during the first quarter of 2008.
“Heightened tenant demand is likely to continue through the first quarter of this year, even if the Bank of England’s latest interest rate cut boosts confidence. In the meantime higher borrowing costs for landlords allied with that increased demand are likely to see rents rise again in the first quarter of 2008.”
www.citylets.co.uk was launched in 1999 and is Scotland’s most successful letting portal. Its quarterly report is the country’s only detailed and independent barometer of the rental market, and is used by investors, as well as potential tenants.
* A copy of the report is available online at www.citylets.co.uk/reports/