Edinburgh’s leading letting agent Braemore Property Management has provided an in-depth analysis of the current state of the Capital’s rental market.
Here, director Colette Murphy, offers her opinions on what has been happening to rents in Edinburgh in recent months, and predicts what the future will bring for the city’s rental market.
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“There’s been a lot of talk about the state of the rental market in recent months and numerous reports about how the recession will affect tenants and landlords over the next 12 months.
“Some commentators are still claiming that demand for rented properties remains high and that the conditions are perfect for buy-to-let investors to return to the market. Others, however, highlight the growing number properties being put up for let and argue that rents are due to fall as a result of supply outweighing demand.
“So with all of this contrasting information, what exactly is happening in the Capital’s rental sector and what does the future hold?
“It should come as no surprise to hear that with the country in the grip of a recession, the housing market is still in ill health, the banks are not lending enough to first-time buyers and, as a result, there are a lot of people who have turned to renting so they can save up for a property of their own in the future.
“That should ensure continued demand. But in recent months, the supply has been there to match this.
“There has been a big rise in the number of people who have bought a new home and have been forced to rent out their old one because they can’t sell it – the so-called reluctant landlords. They have been joined on the rental market by unsold new-builds and family homes – and we could also potentially see some liquidated properties being bought up by cash-rich investors to be put up for rent in the future.
“The most recent quarterly report from Citylets showed that stock levels have risen by 68% across the whole of Scotland compared to the previous year, while the time taken to let properties has also risen.
“It’s a contrasting situation that hasn’t been seen in the rental sector in recent memory, so it means predicting the future for lettings is very difficult.
“That’s particular true when you consider rent levels. While rents have remained steady in recent months, it is possible that the rising number of properties on the market could mean that rental levels become even more competitive as more landlords fight for tenants – and we have already started to see rent falls in some sectors are areas of the city.
“Equally, with so much choice for tenants, I believe that landlords will have to be willing to adapt to any changes that occur in the market over the coming months.
“Investing in and improving properties is likely to be very important when it comes to ensuring that they are let successfully, and we are already starting to see a rise in demand among landlords for specialist refurbishment services. Tenants won’t rent a home that is poorly decorated or that has an inadequate bathroom or kitchen – they will be looking to get the most for their money and landlords will need to invest wisely to make their properties more presentable as well as being good value for money.
“One of the most important things for landlords to also consider will be the need for flexibility. Not only will they have to be flexible over the price they are expecting tenants to pay to rent their property but, with job fears still high and unemployment expected to rise, they will also need to be understanding if tenants find themselves forced to terminate the lease at short notice.
“Although it’s possible that rents could decrease if the supply of rented accommodation continues to be higher than demand, it’s likely that with the correct investment, many landlords will be able to attract tenants who will be delighted with their new rented home and will be happy to extend their leases in the future. If this is combined with better and more open communication between landlords and tenants when it comes to the terms and conditions of a lease, then it is possible to maintain a property on the rental market and make it work as an investment.
“Until the housing sales market picks up – and this could still be some time away – demand for rented homes is unlikely to fall and this means that letting out a property will still remain a good investment. Although it’s difficult to predict what will happen to actual rent levels, the fact is that letting remains a lifestyle choice for many people and there will always be a demand for rented accommodation.
“Over the next year, however, it will be important for landlords to realise they will be in fiercer competition with each other and I would argue that, in particular, home owners considering entering the market need to do their homework properly before putting their properties up for let.”