As Summer 2022 ends, analysis by Rettie & Co. has highlighted the significant impacts to the Scottish housing market of the Covid-19 pandemic and how the market has recovered after a collapse following lockdown in Spring 2020.
The events of the past two years have not only had the short-term impact of igniting the most active period in the Scottish housing market since the years preceding the Global Financial Crisis (GFC) but have also led to fundamental and lasting changes in the market.
In over 30 years selling and letting properties in Scotland I have never experienced a level of activity and sustained demand such as we have seen post Covid. It has been quite extraordinary. This demand has been evident in sales across the country, as John has commented, and equally as high for rental properties. We are expecting to go into more seasonal markets as we venture forward but are confident there will be a continued demand for quality sales and rental properties.
Rising Rents and Falling Time to Let
In the rental market, it is the core urban cities where demand pressures have been greatest, as rising demand, fuelled by increasing migration, student numbers and visitors, has run up against contracting supply as some landlords choose to leave the sector. In Edinburgh the average advertised rent is now over £1,200pcm, having been under £1,150pcm going into the pandemic. In Glasgow, the increase has been more pronounced. Before the pandemic, the average advertised rent in the city was under £800pcm but is now over £997pcm. This means that rents on new tenancies have risen 9% in Edinburgh in the last three years and by 26% in Glasgow. There is evidence that renters are much more exposed to the cost-of-living crisis than mortgagors.
A further illustration of the change in the supply and demand balance in the market in recent years has been the average time a property takes to let. Over the course of the lockdown, both Edinburgh and Glasgow saw a pronounced jump in Time to Let (TTL), with Edinburgh reaching over 40 days and Glasgow over 35 days. In the latest figures, TTL has more than halved to 16 days and 14 days respectively.
Concern Over Rental Supply
Rent growth looks like continuing as demand is running well ahead of supply. Another planned round of legislative change may cause more landlords to exit, turning an affordability crisis into an availability one.
Monthly lettings listings are on a clear downward trend since early 2020, which can be seen in the image below.
Our regular Market Briefings series demonstrates the impact of the global pandemic on the Scottish housing market.
We have had a good return to business since lockdown ended in June 2020 and the strength of the recovery has surprised us.
We do expect market conditions to toughen but the market remains in a state of excess demand, which is supporting activity and prices.
A significant downturn is not currently expected but lending levels and unemployment will be the key bellwethers to watch to see how this plays out.