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Strong yields and growing property prices boost Scotland’s landlords

Wed 21 Nov 2018

As a landlord, you’ll be keen to invest in rental sector hotspots, where demand is consistently high and yields are consistently strong.

Fortunately, for those operating in the Scottish rental sector, this is currently the reality. New findings from a buy-to-let report carried out by Shawbrook Bank and the Centre for Economics and Business Research (CEBR) found that alongside the North West of England, Scotland is the UK’s top rental hotspot for landlords thanks to the high yields on offer.

Why is this the case?

According to the data, landlords in Scotland can generate the second highest yields in the UK – at 5.4% - due to lower initial investment prices. Property in Scotland is generally more affordable, especially in comparison to London and the South East, which makes achieving strong rental yields an easier task. 

In Livingston, West Lothian’s main town, for example, the overall average price for property is currently just over £165,000, while tenant demand is high thanks to easy access to Edinburgh, Glasgow and Falkirk.

Edinburgh, the Scottish capital and a key employment, transport and cultural hub, can be reached in 20 minutes by train or around 40 minutes by car. Glasgow, meanwhile, is a 44 minute train or 40 minute car journey away, and is an increasingly popular location for young professionals, artists and creatives – all demographics who are more likely to rent.

Although challenges are present in the buy-to-let market, with various tax and regulatory changes in recent years, it can still be a very lucrative investment opportunity if you choose the right areas and target the right kind of tenants for your property.

We know that an increasing number of middle-aged people and families are choosing to rent, while a large proportion of millennials (those aged 16 to 34) opt to rent privately. The number of people in this demographic renting has soared in the last 20 years or so, from only 13% in 1999 to around 40% today.

The most recent Scottish Household Survey, published by the Scottish Government this September, found that 15% of households now reside in the private rented sector, up from just 5% in 1999.

In other words, demand has been growing for a number of years and the private rented sector makes up an increasingly large chunk of Scotland’s housing stock. So, those looking to enter the buy-to-let market or grow their existing portfolio should feel confident about achieving excellent rental yields, even in light of the prospect of further interest rate rises and the lack of clarity surrounding Brexit and where Scotland will stand afterwards.

Property prices soar in Scotland

The latest report from HM Land Registry revealed that house prices increased by 3.5% in the year to September 2018, with the UK-wide price gains driven by strong annual growth in Scotland and Wales. 

Prices in Scotland rose by 5.8% in the 12 months to September, to reach an average of £152,961. This follows on from the news in October that Scottish house prices grew faster than the UK as a whole in the year to August 2018. Figures from the UK House Price Index found that the average price of a property in Scotland was £153,309 in August 2018, 4.1% higher than the year before.

These findings are good news for landlords with one eye on capital gains and future resale value. While rising house prices might make initial investment more expensive, the rewards long-term – if you decide to sell your property further down the line – will be bigger.

What’s more, house prices rising may act as a deterrent to would-be buyers, encouraging them to rent for the long-term instead. This, once more, will increase your pool of potential tenants. The bigger this pool is, the better chance you have of charging higher rents and improving your yields further.

Working closely with a reliable agent

To get the most out of your rental properties, and to take advantage of Scotland’s growing reputation as a buy-to-let hotspot, you need to ensure you are fully compliant, up to speed with the latest local and national trends, and fully aware of your rights and responsibilities as a landlord.

Partnering up with an experienced letting agent can help you to achieve this. At Letting Solutions, West Lothian’s first dedicated lettings agency, we have the experience, knowledge and expertise to guide you through the lettings process.

To find out what we can do for you, please contact us on 01506 496 006. Additionally, we provide a free and instant online valuation to give you an idea of how much you could be charging in rent each month.