Existing owners, who through a change in personal circumstances are renting their properties in today’s market, seem very comfortable with the new rent controls. For these circumstantial landlords, the prospect of 6% annual rent increases has been widely accepted as very reasonable and agreeable.
This is primarily because they do not anticipate significant increases in their operating costs, or their interest rates, in the coming 12-24 months.
There is an expectation that we are unlikely to see double digit rent inflation through 2024 given the steep rises seen in 2023. Even if rent inflation did reach 10%, the new rent controls would allow these new landlords to increase their rents by 7.32% next year, which no one can complain about.
Despite this, every one of the new landlords Rettie have spoken to have said they are unlikely to implement any rent increase next year, providing their property is being looked after, and all rent is being paid.
Whilst these new entrants seem very content, mainly because they are setting their rents at today’s market values, the same cannot be said for landlords with historic tenancies. Their rents are now trailing the market (by as much as 40% for those with the longest standing tenancies) and many have been hit with huge rises in their mortgage costs.
The lifting of the eviction ban has also greatly improved landlord confidence. It has removed the anxiety which new landlords had been expressing due to the fear they would not be able to recover their properties should they need to sell, move back in or if their tenant failed to pay rent.
Despite this significant increase in confidence from circumstantial landlords entering the market, there are still no signs of any new investors buying properties for long-term rental purposes in Scotland. Most small scale buy-to-let investors we have spoken to, who have been considering a purchase, have sited the 6% additional dwelling tax as the primary reason for deciding against it. As for any large-scale institutional investors, they simply do not trust the Scottish Government not to change the goal posts again next year, or beyond.
Whilst circumstantial landlords provide an invaluable source of well needed rental accommodation, they are, by their very nature, not providing long-term housing. For transient tenant types, this meets their needs nicely, but for those families hoping to secure a property where they can lay down roots and call home for the next 10+ years, there are very few signs of an improvement to the SNP’s housing emergency.