The analysis of Scottish rental deposit registrations shows that there has been a 430 per cent rise in the number of English landlords using the system since 2012, the figures show.
The figures were released by SafeDeposits Scotland, the nation’s most popular tenancy deposit protection scheme, which accounts for almost 60 per cent of the market.
They suggest that English buy-to-let investors are seeking to capitalise on Scotland’s relatively low house prices and devolved property taxes, which are supposed to help first time buyers.
By law, landlords and letting agents who take deposits from tenants must protect them in a Government-backed scheme in the same part of the UK as their property is located.
When the SafeDeposits scheme was launched in 2012 only 260 landlords living in England used it to protect their tenants’ money, but last year saw a sudden jump to 1,388 new registrations.
The trend appears to be continuing this year, with 437 new registrations already recorded before the start of this month – higher than the total figures for every year between 2012 and 2016.
Victoria Smith, operations manager at SafeDeposits Scotland, suggested that the introduction of Land and Buildings Transaction Tax (LBTT) in 2015 may be behind the trend.
Under the Scottish system, no tax is payable on properties selling for less than £145,000, whereas in England a 2 per cent rate is levied on those worth £125,000 or more.
Scotland’s average house price is only £148,783 compared to £226,000 for the UK as a whole, making it an attractive market for English buy-to-let investors looking to turn a profit.
“Variations in rates of Stamp Duty in England and Land and Buildings Transaction Tax in Scotland may make investing more attractive in the north,” Ms Smith said.
The move could prove doubly tempting for landlords in England due to the upward trend in Scottish house prices, which are currently rising more than 2 per cent faster than the UK’s overall rate.
Having avoided LBTT on an affordable one or two-bedroom property in one of Scotland’s cities, they could potentially rent it out for several years before selling it at a profit.
Adrian Sangster, leasing director at Aberdein Considine estate agents, added that the rise “could suggest that Scotland is still viewed as good value for money compared to England”.