Rental boom promises windfall for builders
John Boyle, director of research and strategy at Rettie & Co, said Scottish cities were now “comparing very favourably on yields, entry prices and growth potential against similar areas in the rest of the UK” in the sector which is rapidly becoming a key part of the market in Scotland. Boyle said recent news that developers such as Moda Living and Apache Capital are acquiring sites north of the Border was fuelling hopes that the build-to-rent sector is poised for major growth.
Figures released last year show the sector in Scotland has already almost tripled in size over the past 16 years and a report by Rettie has identified more than 2,500 built-to-rent units in the pipeline in Edinburgh, Glasgow and Aberdeen.
The growth of the private rented sector (PRS) is in response to the fact a growing number of individuals have little chance of getting on the housing ladder given the huge inflation in house prices seen in the UK. Even if home ownership is affordable, many adults don’t see it is a priority as previous generations did.
As a proportion of total households, the PRS in Edinburgh is as large as it is in London.
With international real estate investors increasingly looking at opportunities in the UK, Boyle said Scotland was an attractive market.
At around 6.5 per cent, 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 per cent. However, this is challenged by prime Glasgow rentals, where affordability ratios are similar in the Merchant City, city centre and west end. Aberdeen and Dundee have more affordable rental markets. In response to growth in the sector, Rettie has recently launched a dedicated site and the firm said it will be making additional hires to its team in the months ahead.
Earlier this year, Moda Living, with joint venture partner Apache Capital, bought the Springside site in the Fountainbridge area of Edinburgh “off-market” from property group Grosvenor with the aim of constructing a “build-to-rent village” in the heart of the city.
The £215 million development will deliver more than 500 new homes for rent in the Fountainbridge area, as well as the purchase of nearly 50 existing private rented homes.
Moda aims to be on site by the end of the year, with the first phase completed by end of 2019 and final completion targeted for the end of 2022.