The Scottish Government has declared a national housing emergency and 13 local authority areas have now called their own local emergencies. The root cause of these emergencies is a lack of housing supply to deal with burgeoning need and demand across all tenures.

With rising migration, increasing homelessness and falling supply, the situation only looks like it will worsen over the next few years.

Strong underlying market fundamentals have kept Scotland’s BTR sector alive, however, there has been very slow progress over the last year and no new investment in the sector for the best part of two years. While a number of schemes have achieved practical completion over the last 12 months, 2024 to date has seen the fewest number of new units entering the pipeline since 2015. These problems are not unique to Scotland as BTR investment has also significantly slowed in the UK, burdened by rising costs. However, the additional political risk in Scotland has seen its main cities fall well behind BTR delivery in cities like Manchester and Liverpool.

Revisions to the Housing Bill will be required to breathe life back into the sector, otherwise this major new tenure will drift south and beyond the UK.

Dr John Boyle MRICS
Director of Research & Strategy

Underperformance

According to a recent report by Colliers, Edinburgh and Glasgow should be positioned 1st and 2nd in the whole of the UK in terms of the attractiveness of residential investment. This is based on an analysis of a series of socioeconomic indicators as well as factors such as liveability.

BTR delivery in Scotland’s largest cities has improved over the last 12 months, particularly in Glasgow, where a number of significant schemes have now completed. Despite this, Scottish cities lag well behind many of their wider UK counterparts in terms of the rate of delivery.

Glasgow’s delivery has improved and it's now keeping pace with cities like Bristol, Leeds and Birmingham. However, Edinburgh’s performance is lagging well behind the No.1 status given to it by Colliers, with a completion rate below that of Aberdeen.

All the major Scottish cities, however, have low rates of delivery compared to the BTR powerhouse areas of Manchester, Liverpool and a number of the London boroughs.

Affordable housing is largely delivered through a system of grant funding for Registered Social Landlords, but the delivery of this stock has been threatened by build cost inflation and the cuts by the Scottish Government to its Affordable Housing Building Supply Programme (AHSP).

The consequence of these delays, policies and uncertainties has meant fewer affordable housing completions, and a number of business failures within the construction sector

Sandy Gilmour
Associate Director

Success Stories in Housing Delivery

Rettie have advised Thriving Investments MMR Fund from its inception in 2017. No grant funding is used in this delivery model, which suggests there are other ways of delivering long term rental stock. The MMR Fund has raised a total of £225m and is now closed on the fundraising side. The Fund has deployed most of that capital and now has 736 units operational and under management, with another 335 units purchased and in the pipeline. In addition, the Fund remains acquisitive and is under offer on another 79 units – taking the total to 1,150 units.

William Kyle, Fund Manager, says “The New Avenue Living Mid-Market Fund has tapped into a sector of great need for essential workers across Scotland’s two largest cities. We are experiencing high demand, high occupancy rates and very positive customer feedback. We believe the model works well and is a credit to all of our delivery partners. We look forward to growing and evolving the model in the coming years.”

View from the Industry

Scotland has huge potential for additional Build to Rent (“BTR”) neighbourhoods and the success of our existing neighbourhoods at Moda, Holland Park and Casa, Vista Park in Glasgow, as well as Moda, The McEwan in Edinburgh, is testament to the demand for high quality, professionally managed rental accommodation. The introduction of rent controls over two years ago and the publication of the March 2024 Housing Bill saw residential investors forced to turn away from Scotland at a time when the demand for housing outstripped supply and major cities and the Scottish Government themselves declared housing emergencies.

"Our passion for Scotland remains undiminished and whilst optimism is starting to return to investor discussions, time continues to slip by as the demand for quality rental homes in Scotland grows daily." James Blakey, Planning & Engagement Director, Moda Group.

Read the full report

Lead Researcher
Dr John Boyle MRICS
Director of Research & Strategy
Consultancy & Research
Published: 25 Nov 2024
Build to RentNewsResearch
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