New lease of life for soaring rental sector
HOME rentals are soaring as increasing numbers of young Scots put their dreams of property ownership on hold.
One letting agency says new rents have increased by 80% compared with last year, as a result of rampant house price inflation and intense competition for what few affordable homes remain in Scotland’s property hot spots.
Despite speculation about a house price crash and indications of an imminent rise in interest rates, the market is stubbornly refusing to follow the script.
The average price of a property in Scotland is 90,000, with Edinburgh at 169,813. House prices are increasing by more than 100 a day, and recent figures showed a third of prospective first-time buyers in Scotland had given up hope.
Edinburgh-based Alba Residential said it had experienced a rush in rentals in the past two months, fuelled by couples and families who are fed up trying and failing to land their dream property.
The company, which manages nearly 700 properties in Edinburgh, said many new tenants were opting to rent short-term in the hope that the property market will have cooled in six months. They claim a minority are resigned to renting permanently.
Managing director Paul Dickens said his firm rented 72 properties in April compared with 40 for the same month last year - an increase of 80%.
He said: "There is no doubt that this sharp rise is linked to the number of people who have opted to rent because they simply cannot get into the property market.
"Springtime is always a traditionally strong time for buying and selling, so it is no surprise that our sales have increased as people have been foiled, perhaps repeatedly, when trying to land a house.
"For many of these new tenants, it will be a case of taking out a six-month lease in the hope that the market, or perhaps their own circumstances, change to allow them to try again later in the year.
"But there are many who will be increasingly looking to rent full-time as this represents the most sensible and cost-effective course of action for them."
Renting does make short-term sense for those people priced out of hotspots. A flat in the Edinburgh’s Marchmont might cost 200,000 and require a mortgage in the region of 1,100 a month. Renting the same property could cost around 650. Experts say there is over-capacity in the letting market after large numbers of well-off home owners invested their spare cash in properties for rent. It is also predicted that rental levels will rise at a much slower rate than house prices.
Richard Last, 32, a personal trainer, is renting a flat because he is unable to afford to buy in Edinburgh. He earns about 25,000 a year but says this is not enough to secure a property in the city.
"I recently looked into buying but the mortgage dealers have worked out that to get something in town I would be looking at monthly repayments of at least 750 for a property of about 100,000," he said.
Last, who lives alone, rents a one-bedroom flat in James Square, off Caledonian Crescent in the city’s West End, and pays 480 a month. For this he also gets the use of a private swimming pool, gym, sauna and private parking.
"By renting this property I can just fall out of bed into work and I can afford to socialise as well. The price of property has reached almost silly proportions," he said. "I’m just hoping that at some point soon the prices will drop so I can get on the property ladder."
A spokesman for DJ Alexander, an Edinburgh letting agency which lets more than 1,300 flats in the city, said the rented property sector was enjoying a revival.
"We’ve let 100 properties in the last month which is about a 15% increase than last year," he said. "It has been very busy so far. People are renting in order to save money so they can buy in the future, or even working out a plan with friends or partners about pooling resources."
A spokesman for Countrywide Residential, which has offices in Glasgow and Edinburgh, said: "There has been an increased interest in the rentals market from first-time buyers, but I don’t think they have given up hope entirely. I think people know that prices aren’t likely to fall - but they also know they can’t afford to buy a property at the moment - so they don’t have much choice but to rent."
A spokesman for the Association of the Residential Letting Agents said the property market was experiencing a new phenomenon.
"Traditionally the rentals market is given a boost when the house market is down," he said. "That it is being invigorated because the house market is doing almost too well is a new thing altogether."
Simon Fairclough, the Edinburgh Solicitors Property Centre (ESPC) marketing director, said: "While it is true to say that letting agents are enjoying a busy time because many people who want to buy their own homes simply can’t, many are still desperately saving up. They are still hopeful of owning their own homes eventually."
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