Rents rising as Scots give up on ownership

SCOTS are turning to long-term renting in growing numbers as the housing market crisis drives owner-occupation levels down, new evidence suggests.

The trend emerges in the latest quarterly figures from lettings website Citylets, which reports an unprecedented demand for private rental property. That is making rental properties more expensive, with the average price in the capital up 3.2 per cent in the past year.

Mortgage lending levels remain severely restricted as banks continue to freeze first-time buyers out of the market, and while some indices suggest a recent rise in house prices, most experts predict a continued decline over the next year. One outcome is increased demand for rental properties, as would-be buyers put their plans on ice and sellers opt to rent for a period rather than buy immediately.

The biggest indication of demand comes in a sharp reduction in the length of time properties are available for let, according to Citylets.

The time-to-let average fell to 36 days in the three months to the end of September, compared with 42 days in the same period last year. More than half of properties on the market are letting within a month - for the first time in two years - with 17 per cent being taken within a week, up from 12 per cent in the third quarter of 2009.

Dan Cookson, senior analyst at Citylets, said: "The long-term tenure patterns for the UK point to a potential re-emergence of the private rented sector as the second most popular form of tenure, overtaking social housing, within the next ten years. However, this future expansion of the private rented sector is unlikely to happen without the additional input of institutional investment in 'build to let' projects."

The boom in rental demand increases the pressure on housing supply and means tenants in many areas of Scotland are seeing prices creep up. The average monthly rent was 649 in the third quarter, up 1.4 per cent from the same period in 2009,.

There is significant variation between areas and property types. For example, rental costs for three-bed properties in the capital have jumped by an average of 4.2 per cent in the last year, reflecting growing demand from families. Two-bed properties - which account for almost half of Edinburgh's rental market - rose 3.3 per cent to an average of 685 and typically took just 28 days to let out.

The cost of renting a three-bed property in Glasgow increased by 4.4 per cent to 827, although one-bed rents dropped marginally. Aberdonians saw rents for two-bed flats - which make up 47 per cent of the city's rental stock - soar by 4.8 per cent over the year to 800, but the average three-bed property cost 3.3 per cent less to rent than a year ago.

Higher demand and rising prices are better news for letting agents, however. Steven Currie, at Edinburgh letting agents Murray & Currie, said: "We are seeing a more positive attitude towards renting among those clients that would previously only have considered buying.

"There are a lot more people taking out 12-month leases and looking for long-term rented accommodation as a place to make a home."