Clarity on private rental sectors reforms brings new breed of institutional investors to Scotland

The Scottish Government’s Bill to reform the private rental sector (PRS) could usher in a wave of investment in housing from a new breed of funds targeting ‘generation rent’ with high quality flats and apartments, according to experts at Colliers International.

The Private Housing (Tenancies) Bill, which offers protection to tenants against the threat of eviction and big rent increases, was widely hailed as an important step forward by tenants’ groups and housing charities when details were published earlier this month – but many landlords expressed concern and said the move could stifle investment.

However, Mark Donnelly, associate director, corporate recovery at Colliers International in Scotland, said the proposals being put forward in the Bill were not as bad as many had feared, and removed a long-standing question mark that had been hanging over the PRS in Scotland since Holyrood first mooted the idea of rent controls more than a year ago.

He said: “There’s been a lot of apprehension and concern in the PRS over the measures that were being considered, and especially the possibility of rent controls. Now we have more details and it actually isn’t that bad for landlords. They will still have the option of positive rent growth year-on-year, which is key from an investment point of view.”

Colliers has been advising a number of UK and International funds keen to invest in the emerging asset class in the UK. These institutional investors, which have been active in London and more recently Manchester, are typically looking to invest in large scale developments of flats or houses, which are specifically designed to provide high quality rented accommodation. Usually built in city centres, the properties are aimed at a generation of young professionals who are either not expecting to buy their own home or are in no hurry to do so – but instead want high quality living space and are prepared to pay a premium for it.

Mr Donnelly said: “These funds have been looking at opportunities in the key regional centres across the UK as competition in the London market intensifies but up until now Scotland has been out of bounds because nobody was sure what the government was going to do. Recent further detail relating to The Private Housing (Tenancies) Bill provides clarity and, although may prove unpopular with small landlords, there is nothing in it which ought to stop institutional investors considering Scotland for PRS investment.

“It should bring Edinburgh, Glasgow and Aberdeen back onto the radar for these funds, which in turn should eventually offer a useful addition to the current housing mix available in Scotland’s biggest cities.”