February 2015

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Slowest rent rises for two years Scottish rents up just 1.1% in past twelve months – smallest annual rise seen since April 2013

At £537, average monthly rent now only £6 higher than a year ago, after 0.2% boost in February

But tenant arrears reach highest level since 2012, with late rent soaring to 8.1% in February 2015

Typical landlord sees total annual returns of £12,700 in last year – but far higher at £21,000 in Edinburgh

Scottish rents are rising at their slowest pace for over two years, according to the latest Scotland Buy-to-Let Index from

Your Move, one of Scotland’s largest lettings agent networks.

The average monthly rent in Scotland has risen just 1.1% in the year to February 2015 – representing the smallest

annual increase experienced since April 2013. But despite this slower and more affordable pace of rent growth in

Scotland, the financial health of tenants has declined over the same period, and February saw the highest proportion of

late rent since December 2012.

The average residential rent across Scotland has increased only £6 in the last year, reaching £537 per month in

February. This represents a significant downtrend in annual rent rises, which peaked at 4.3% a year previously in

February 2014 (equal to a £21 annual boost in cash terms).

On a monthly basis, Scottish rental prices have

climbed a modest 0.2% since January, but this marks

the first monthly rent rise witnessed since November

2014, as the market slows down.

Brian Moran, area lettings director at Your Move,

comments: “Such an incremental rise in Scottish

rents over the past year shows admirable stability in

the private rented sector. Despite high demand for

homes to let in the face of the current housing

shortage, rent inflation in the lettings market has

remained remarkably affordable for tenants.

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“After cruising along on a pretty even keel until late 2012, we then

saw steep rent rises stack up against tenants – as the abolition of

tenancy fees in Scotland knocked the market out of kilter.

“The Scottish private rented sector has subsequently been on quite

a rollercoaster ride, but rent growth has its feet firmly on the ground

once again, and is making steady strides forward.

“But while improvements in the affordability of the lettings market

mean that tenants are able to keep up with rent rises, other

economic factors are holding them back from making solid financial

progress and continuing to drag tenants into the red.”

Rents by region

Rents are now higher than a year ago in three out of five

regions of Scotland. Edinburgh & the Lothians have

experienced the strongest annual rent growth, with prices

climbing 2.5% (equal to £15) in the twelve months to

February 2015. This is closely followed by Glasgow &

Clyde, where rents are up 2.3% (£12) year-on-year. The

East of Scotland witnessed a 2.2% annual rise in average

rents, setting a new record of £530 per month.

In two regions of Scotland, rents have fallen in the past

year. The Highlands & Islands experienced the biggest

annual drop in average rents, falling 1.6%, equivalent to £9

in cash terms. Meanwhile, monthly rents in the South of

Scotland are 1.5% lower than in February 2014.

On a monthly basis, rents have increased in just two out of

five regions of Scotland. For the first time in eight months,

rents in the South rose on a monthly basis, up 1.3% since

January 2015 to £489. In the East of Scotland, rents

climbed 0.4% (£2) during the month, to reach a new peak.

In February 2015, rents dropped in three of five regions in

Scotland. Despite having the strongest annual rent

inflation, Edinburgh & the Lothians witnessed the biggest

monthly downturn, with rents falling 0.9% in a month to

£598 in February. Both Glasgow & Clyde and Highlands &

Islands experienced rent drops of 0.2%.

Monthly rents in February: By region

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Tenant Finances

In February 2015, tenant arrears in Scotland reached the highest level for more than two years. The proportion of late

rent rose to 8.1% in February, climbing from 7.1% in January. This also represents a significant rise on an annual basis,

up from 6.8% in February 2014. Tenant finances were only in worse shape during December 2012, when rent in arrears

reached 8.5%.

Brian Moran continues: “Scottish rent rises have decelerated, but while this should have freed up tenant finances, too

many renters are stuck in the mud of late payments. For those Scottish households who are still finding their rent a bitter

pill to swallow every month, the fruits of the recovery have a long way to go before they can be tasted.

Low fuel and food prices have been one welcome crutch, but have not sufficiently improved the financial health of

Scotland’s tenants, and the root of the sickness can be found the jobs market. With unemployment rising in Scotland

and now overtaking the rest of the UK, more needs to be done to get people into work, and earning a healthy salary,

before tenant finances rally.”

Yields and Returns

As of February 2015, the average gross yield on a rental property in Scotland is 4.0%. This has held steady since the

previous month, and represents a dip on an annual basis from 4.1% in February 2014.

Taking into account property price growth and void periods between tenants, the average total annual return on a rental

property in Scotland stands at 8.2% in the year to February 2015. This marks an uptick from 8.1% last month, and also

represents an improvement on 7.0% a year ago, as house price growth picks up again after the conclusion of the

referendum on Scottish independence.

In absolute terms this means the average buy-to-let investor in Scotland has seen a return, before any mortgage

payments or maintenance costs, of £12,689 over the twelve months to February 2015. This rises to £20,955 in

Edinburgh on average.

Looking ahead, if the value of rental properties continues to climb at the same rate witnessed over the last three months,

the average landlord in Scotland could expect to make an overall annual return of 10.8% in the coming year, equal to

£17,487 per property.

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Brian Moran concludes: “The Scottish housing market has braved the choppy waters around the independence

referendum, and as property prices sail forward once more, landlords are seeing more buoyant total annual returns

February. But it’s not just attractive capital gains on the horizon, and while rents have remained affordable for tenants,

rental income and gross yields have continued to stay afloat too, and this has encouraged more and more landlords to

add to the pool of available homes to let.

“The rental market acts as a compass of the direction of the economy and the jobs market, and as a result landlords in

the Scottish capital are experiencing some of the strongest returns as heightened demand to live and work in Edinburgh

pushes house price higher and sparks more competition for homes to let.

“Luckily for tenants, the current economic backdrop makes buy-to-let an increasingly attractive investment for many –

with rock bottom interest rates facilitating generous buy-to-let mortgage deals and slashed stamp duty; it’s easier than it

has been in a long time to invest in property. This investment gives tenants some vital elbow room to start saving up for

their own leap onto the housing ladder, as more choice of homes on the rental market keeps rent rises at bay.”

- ENDS -

Rents February

1 month change

Annual Change

Yields February 2015

Yields February 2014

East £530 0.4% 2.2% 3.6% 3.7% Edinburgh & Lothians £598 -0.9% 2.5% 3.3% 3.4% Glasgow & Clyde £556 -0.2% 2.3% 5.0% 5.1% Highlands & Islands £541 -0.2% -1.6% 4.1% 4.4% South £489 1.3% -1.5% 4.3% 4.4% Scotland £537 0.2% 1.1% 4.0% 4.1%

For further information please contact:

Emily Barnes, The Wriglesworth Consultancy 0207 427 1403

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Melanie Cowell, LSL Property Services 01904 698860

METHODOLOGY:

The index is based on analysis of approximately 3,000 properties across Scotland. Rental values refer to the actual

values achieved for each property when let. Gross yield figures are unadjusted, and do not take account of void periods

or arrears. Annual returns are based on annual rental property price inflation and void-adjusted yield twelve months prior

to the reference month. These figures are subject to revision as more data becomes available.

This Buy-to-let index has been prepared by The Wriglesworth Consultancy for Your Move, part of LSL Property

Services. It has been compiled using information extracted from Your Move’s management information. The copyright

and all other intellectual property rights in the Buy-to-Let Index belong to LSL. Reproduction in whole or part is not

permitted unless an acknowledgement to LSL as the source is included. No modification is permitted without LSL’s prior

written consent.

Whilst care is taken in the compilation of the Buy-to-Let Index, no representation or assurances are made as to its

accuracy or completeness. LSL reserves the right to vary the methodology and to edit or discontinue the Buy-to-Let

Index in whole or in part at any time.