Despite the implementation of rent controls, the private rental sector in Scotland has experienced a sharp surge in rent prices. Specifically, average rents for new tenancies have surged by double digits for the fourth consecutive month, as indicated by recent data from the letting portal, Citylets.
These consistent price increases challenge the effectiveness of the Cost of Living (Tenant Protection) (Scotland) Act 2022. This legislation, introduced with the intention of capping rents within tenancies, might ironically be driving prices upwards in the open market.
Future Outlook on Rent Control Legislation
The emergency legislation, set to expire on March 31st, 2024, is expected to be replaced with a more comprehensive and permanent solution. The government’s focus seems to be leaning towards further capping of rents, including in the open market. This move is catalysed by the belief, shared by many, that the current legislation is a precursor to the upcoming regulations.
Thomas Ashdown, Citylets MD, commented on the situation, emphasizing the importance of expanding the housing sector. A larger supply of homes would naturally regulate the overheated rental market, leading to more affordable rent prices.
Regional Growth and Market Dynamics
The rental market’s rapid growth is not confined to a single area. Almost every major region in Scotland has witnessed annual growth rates of up to 19% in the third quarter of 2023. This surge has intensified the competition among potential renters, making the market particularly challenging to navigate.
Moreover, there’s an evident mismatch between supply and demand in Scotland’s two main cities. Karen Turner of Rettie & Co highlighted the aftermath of the busy summer months, wherein tenant demand heavily outweighed supply. The upcoming short let regulations are expected to exacerbate this issue. She stressed the urgent need for the Scottish government to address the housing crisis across all sectors, advocating for incentives over barriers for landlords.
Current Rental Rates in Scotland
In the first quarter of 2023, the average rental property in Scotland surpassed the £1,000 threshold. As of the recent data, this average has further increased to £1,115 per month, marking a 13.7% year-on-year growth.
Gillian Semmler, PR Manager at Citylets, shed light on the challenges prospective tenants face in finding suitable rental properties. With the third quarter of 2023 following this trend, the emphasis is on the need for more individual and corporate entrants in the market. A larger and more diverse rental market, as Semmler suggests, is more likely to meet the ever-increasing demand.