Build to Rent is a sector that is a potential ‘game changer’ in terms of providing much needed new housing across the UK. However, to date, its use in Scotland has been limited.
This is now changing as major projects are emerging north of the border. Having advised on the largest BTR deal in Scotland to date and having delivered over 600 properties into rental tenure in recent years, Rettie in this Market Briefing consider what is pushing the sector forward now in Scotland and the challenges the sector faces going forward.
Key Findings
• BTR is now emerging in Scotland as a key new residential use class, with over 2,500 units now in the pipeline in Edinburgh and Glasgow and a successful scheme operating in Aberdeen.
• This is driven by a rising rental market and socioeconomic changes, in the overall context of weak housing supply, creating opportunities for developers and investors. As a proportion of total households, the PRS in Edinburgh is as large as it is in London (around one-quarter of all households).
• Scottish cities compare favourably to other parts of the UK in terms of yields, entry prices and potential for growth. At nearly 7%, average gross rental yields in Glasgow are as high as they are anywhere else in the UK.
• The New Town, City Centre and West End are Edinburgh’s rental hotspots, where rent to income ratios are around 40-45%. However, this is challenged by prime Glasgow. Aberdeen and Dundee have more affordable rental markets.
• Affordable BTR schemes are now established in Scotland, with high levels of demand in appropriate locations, including Western Harbour in Edinburgh, where there were over 3,400 applicants for a 96-unit development.
• The Scottish BTR market has a number of distinctive features that need to be taken into account in development and investment decision-making.