From Spring 2023 through to Autumn, demand for rental properties across Edinburgh and Glasgow far exceeded supply, leading to steep competition between tenants and double digit rent inflation.

With the 3% rent cap remaining, combined with the rise in interest rates, landlords with vacant properties increased their rents more than in previous years. As history has so frequently demonstrated, rent controls force rents to rise, due to their impact on supply, and the need for landlords to ‘front-load’ rents to protect against future increases in operating costs.

Rent inflation in both cities was reported to be higher than all other UK cities. This is no coincidence given the extremely high transaction tax paid which must be paid by new buy-to-let investors in Scotland which has placed a strangle hold on supply.

At the start of October, the seasonal slow-down in demand for mid to high level properties fell away far more dramatically than expected. We saw a reduction in career driven, relocations to both cities, which generally accounts for rental demand at the upper end of the market. This led to a build-up of ‘executive level’ stock, with many agents forced to reduce prices significantly from the peak prices seen during the summer.

During the first half of September 2023, after the peak summer rush, available stock levels in Edinburgh city were 30% lower than during the first 2 weeks of January 2024. The number of new tenancies secured during the first half of January was around 32% lower compared to the same period in September. Glasgow city saw stock levels in January 22% higher than in September, with a 27% reduction in the number of new tenancies secured. (Source Rightmove)

After the traditional slow start after the new year, we have been encouraged by a steady rise in demand thus far, and all indications are that demand will continue to rise through to Autumn 2024.

Until more is done by the Scottish Government to encourage new investment in the private rented sector, we expect further rent inflation through 2024, but it is unlikely to see another year with double-digit growth as this is simply unsustainable.

We are due to see the end of the eviction ban by April, and indications are that there will be a relaxation of the current increase cap, but it is expected that rent controls will continue to exist in some form.