Rent Cap Could Have Unwelcome Consequences For Tenants

Investing In property in edinburgh

The government cap on rent increases in Scotland’s private rented sector could have unintended and unwelcome consequences for tenants looking for new properties, according to the latest Citylets market report.

While the 3% cap on rent rises that’s in place until at least September has afforded protection for existing tenants, a gulf is now developing between protected rents and those of newly advertised rental properties.

Citylets analyses data from letting agents across Scotland and creates city-by-city quarterly reports. The first report of 2023 paints a broadly positive picture for landlords but highlights the struggles faced by tenants looking to rent.

Wider Rent Gap Could Grow

New tenants are struggling to understand why they’re being asked to pay so much more than friends and family who are already renting. And if the cap stays in place for longer, Citylets says there’s potential for an even wider gap to grow.

Unstable mortgage interest rates mean some people have put off plans for home ownership in favour of renting until the financial crisis settles. However, rising rents have the potential to slow down that trend.

Property Shortage Pushing Up Rents

In Edinburgh, the ongoing shortage of all types of buy-to-lets has created serious supply issues and this continues to impact rents. Properties are snapped up in record time, often without being advertised on the market, and tenants are doing all they can to be top of the list.

In the first quarter of 2023, 81% of homes were let within a week and the average monthly rent was £1,372. Wind the clock back five years and average rents were almost 30% cheaper – 10 years and it’s almost 70%.

The Citylets report says: “Material concerns for supply persist with industry consensus that recent legislation, however well intent, will increasingly exacerbate the root causes of the problem.”

In the first quarter of 2023, one-bedroom properties took an average of just 16 days to rent, with two-bedroom homes close behind at 21 days.

New Licencing Scheme Could Have A Positive Impact

Edinburgh’s record rents look set to continue on an upward trajectory unless there’s a material change in the property shortage landscape. One positive factor is the new legislation controlling short-term lets, which could release more homes onto the market.

All short-term lets in the city must be licensed by 1 October and meet strict conditions similar to those for HMOs, including submitting a planning application for change of use. However, properties in blocks with shared hallways and entrances are automatically deemed unsuitable, unless all neighbouring property owners agree.

For owners of holiday flats and Airbnbs in the city, the legislation could signal the end of short-term letting. But acute property shortages mean there’s huge potential to switch to long-term lets, which offer the advantages of stability, reliable tenants and no periods without rent coming in.

Making The Switch To Long-Term Letting From Airbnb

Clan Gordon looks after more than 600 rental properties for landlords across Edinburgh and can advise on changing from short to long-term letting, as well as offering a complete property management service.

To find out more, click here to schedule a call with one of our expert property managers.

 

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