Scottish rents hit record high as LBTT surcharge bites

The latest Scotland Buy-to-Let Index from Your Move revealed that average residential rents have increased by 1.3 per cent from April to reach the highest they have ever been in Scotland, surpassing the previous record set in July 2015.

The increase means that the average rent in Scotland have seen a 7.9 per cent (£40) upswing from £509 per month in May 2011.

Brian Moran, lettings director at Your Move Scotland, attributed the increase to the introduction of the new Land and Buildings Transaction Tax (LBTT) surcharge.

He said: “Rents are rising rapidly as a result of the new Land and Building Transaction Tax surcharge for buy-to-let properties. This tax hike has dissuaded landlords from investing in the sector leading to a shortage of homes to rent, compared to the demand for housing. With the limited supply of rental properties, potential tenants have been forced to compete to secure homes, pushing up rents. The introduction of this anti-landlord legislation from Holyrood has ensured the cost of the policy has hit tenants hardest.

“Since the SNP came to power five years ago, monthly rents have increased by an average of £40. However, the rent control policy in the Scottish Government’s private tenancies bill will only treat the symptoms, not the cause of rising rents. By limiting the rent that can be charged on a property, becoming a landlord will become less appealing, limiting investment and forcing many to consider leaving the sector. This will lead to an even greater shortage of homes to rent.

“In addition, without the potential incentive of higher rents, landlords will lack the motivation and finance to improve the quality of their properties. The Government needs to look at incentivising landlords to increase the supply of rental properties in Scotland. With more homes available to rent, tenants wouldn’t need to compete for properties and rents would be more affordable.”

On a monthly basis, rents rose across all of Scotland’s regions in May. Glasgow & Clyde has seen the steepest uplift month-on month, with rents in the region increasing 1.9 per cent from April. This amounts to a £11 jump in cash terms, with typical rents increasing from £538 in April, up to £549 in May.

The smallest monthly upswing in rents occurred in the Highlands & Islands where they increased by just £1. In the South of Scotland, the increase in rents was also marginal, with only a 0.2 per cent uptick leaving typical rents to standing at £514 – the lowest average of any region.

Meanwhile, in Edinburgh & the Lothians, rents continued their upward trajectory, rising 1.7 per cent (£11) from April, pushing the typical rent in the region to a record high of £662 per month.

The East of Scotland has seen rents increase by 1.7 per cent (£9) month-on-month. This has raised the average rent in the region to £522 – the highest level since November 2015.

In the longer term, rents are only higher in two of Scotland’s regions year-on-year. In Edinburgh & the Lothians, rents have soared 11.6 per cent (£69) year-on-year. This is the fastest growth on record powered by the growing proportion of higher paying jobs in the area, compared to the shortage of homes. The South of Scotland has also seen an increase in rents over the year, with a 0.9 per cent upswing. Average rents in the region are £4 higher than May 2015.

Glasgow & the Clyde has seen the steepest decline in rents annually. Typical rents in the region have dropped 3.2 per cent (£17) year-on-year.

Tenant arrears in Scotland have also climbed for the third successive month.

The proportion of late rent increased to 12.5 per cent of all rent due in May, compared to 11.6 per cent in April. On an annual basis, tenant arrears have worsened too, with late rent standing at just 8.8 per cent in May 2015.

Brian Moran added: “Scottish tenants are finding it harder to pay the rent. Tenant finances improved over the winter months, but it appears spring has been a tougher test. With employment in Scotland falling by 48,000 between February and April, some tenants may be struggling to make ends meet. However, on a positive note our research shows fewer tenants are falling into serious rent arrears, where they are more than two months behind in their rent.”