Under embargo until 00:01 Wednesday 25th February 2015 January 2015

Rents up 5.3% since last Scottish election Scottish rents climb 1.3% in past twelve months – half the pace of rent growth in England & Wales

Average residential rent in Scotland now £536 a month, following 0.1% monthly fall in January

Rents in the East of Scotland reach new record high in January, after 3.2% uplift in past twelve months

Despite slight monthly improvement, tenant finances worse than a year ago - with 7.1% of rent late

Since the last Scottish elections, rents have risen at only half the pace of growth seen across England and Wales, 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 is now 5.3% higher than at the time of the previous elections to the Scottish Parliament. As of January 2015, the typical residential rent in Scotland stands at £536 per month, up from £509 in May 2011.

This rent growth represents just half the pace of rent increases across the rest of the UK over the same time period. By contrast, the average residential rent across England and Wales has climbed 9.6% since May 2011, according to the latest LSL England & Wales Buy-to-Let Index.

Following a 0.1% monthly dip in rental prices during January, the average monthly rent for Scots is just 1.3% (£7) higher than a year ago. But south of the border, rents in England and Wales have risen 2.8% year-on-year.

Brian Moran, area lettings director at Your Move, comments: “Scottish tenants are having a much smoother ride than their counterparts south of the border, with rental prices in Scotland climbing at a considerably slower pace. Despite snowballing demand for homes to let, the private rented sector has managed to shelter tenants from the worst extremes of rent inflation, and rents have navigated

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an affordable route broadly trailing inflation.

“But the overall story since the previous election papers over the different chapters we’ve experienced within this parliament. Scottish rents were largely on pause throughout 2011 and 2012, and it was the abolition of tenancy fees in November 2012 which jolted to life a sudden uptick in rents, as costs were recouped other ways. The majority of the rent growth falls in the last two years, and the tempo is just easing back into a more organic swing.

“Housing is a policy area that impacts every one of us, and ahead of the general election tenants will have their ears on the ground to listen out for any rumbles of further changes to lettings legislation that might impact the sector. Investment in homes to let needs to keep pace with demand, and landlord confidence is an essential ointment to soothe the pains of the current housing shortage, and make rent rises an easier pill to swallow for tenants.

Rents by region

In the past year, rents have risen in three out of five regions of Scotland. Rents in Edinburgh & the Lothians have increased nearly three times as fast as across the rest of the country, jumping 3.8% (£22) in the twelve months to January 2015, compared to a 1.3% annual rise for all of Scotland.

The East of Scotland has seen the second strongest annual rent growth, with a 3.2% (£16) year-on-year increase. Glasgow & Clyde rounds off the group with 1.3% annual rise in average rents.

In two regions, average rents are now lower than they were a year ago. In the South, rents have fallen consistently for the past seven months, resulting in an overall 1.6% (£8) annual fall in rents. The average monthly rent in the South now stands at £483, a decline from £491 in January 2014. In the Highlands & Islands, average monthly rents are 1.4% lower than a year previously.

In January, rents dropped in three of five regions in Scotland. After strong rent inflation in the past year, Edinburgh & the Lothians experienced the biggest monthly fall, with average rents dipping 1.2% (£7) in January. This was followed by 0.2% dips in both Glasgow & Clyde, and the South.

Amidst a broad slowdown in the lettings market, only two regions experienced a rent rise in January. The Highlands & Islands experienced the biggest monthly uplift, with rents up 0.9% (£5) since December. The East saw rents climb 0.6% in the month to January, reaching a new record of £528 per month.

Yields and Returns

As of January 2015, the gross yield on a typical rental property in Scotland stands at 4.0%. This is consistent with the previous month and down on an annual basis of 0.1 percentage points from 4.1% in January 2014.

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Monthly rents in January: By region

Taking into account property price growth and void periods between tenants, the average total annual return on a rental property in Scotland stands at 7.2% in the twelve months to January 2015. This represents a decline from 7.4% a year previously, and is also down from 7.7% in December, after a lull in house price growth around the referendum.

In absolute terms this means the average Scottish landlord has seen a return, before any mortgage payments or maintenance costs, of £11,175 over the twelve months to January.

As house price growth starts to pick up again, if the value of rental properties continues to climb at the same rate witnessed over the last three months, the average buy-to-let investor in Scotland could expect to make an overall annual return of 5.6% in the coming year, equal to £8,918 per property.

Brian Moran comments: “A breeze of change has rippled through the Scottish housing market, and property prices have settled onto a steadier trajectory, calming landlords’ total annual returns in January. But fundamental rental yields have weathered this slowdown on a strong footing of rental income, and for landlords with their eyes on the end game, capital gains are secure, as house prices recover from referendum jitters.

“Landlords are the vital middle men – ensuring that favourable economic conditions reach tenants too. Attractive

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mortgage products, record low interest rates and lower stamp duty make buy-to-let an even more exciting proposition now, and further investment will keep the wolf from the door for Scotland’s tenants. Thousands of households rely on the private rented sector to follow the best job opportunities, or while saving for a deposit to buy themselves, and choice is the greatest gift landlords can give them, to keep rent rises sustainable.”

Tenant Finances

Tenant finances across Scotland improved marginally in January. The proportion of rent arrears dipped to 7.1% in January, reducing from 7.2% the previous month. But on an annual basis, the financial health of Scotland’s tenants has declined, with the proportion of late rent up from 6.8% in January 2014.

Brian Moran concludes: “Scottish tenants are fighting fires with their finances at the moment, and while the flames of late rent died down marginally in January, many households are still embroiled in the red. This isn’t just the remnants of a Christmas crush on the purse strings – a greater proportion of Scottish households are struggling to keep in control of their rent payments than the same time a year ago.

“While falling petrol and shop prices might be sparking a superficial feel-good factor, under the surface these are drops in the ocean when up against monthly outgoings such as rent and utilities. For these hefty household bills, wage inflation is the sticking point, and until those wheels are greased, many renters aren’t moving anywhere fast with their finances.”

- ENDS -

 Rents January

1 month change

Annual Change

Yields January 2015

Yields January 2014

East £528 0.6% 3.2% 3.6% 3.7%Edinburgh & Lothians £603 -1.2% 3.8% 3.4% 3.4%Glasgow & Clyde £557 -0.2% 1.3% 5.0% 5.1%Highlands & Islands £542 0.9% -1.4% 4.2% 4.4%South £483 -0.2% -1.6% 4.2% 4.4%Scotland £536 -0.1% 1.3% 4.0% 4.1%

For further information please contact:

Emily Barnes, The Wriglesworth Consultancy 0207 427 1403

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.

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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.

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