LSL Property Services : Dec 14 Scottish Buy-to-Let Index

Under embargo until 00:01 Wednesday 21st January 2015 December 2014

Rent rises tumble during 2014

 Average residential rent in Scotland dropped 0.4% in December, down to £536 per month

 Scottish rents rise 1.2% in last year, less than a third of the 3.9% annual growth seen in December 2013

 But Edinburgh bucks this trend, with year-on-year rent growth accelerating to 4.5% during 2014

 Tenant finances suffer at Christmas, with 7.2% of rent late - the highest proportion since May 2013

The pace of annual rent growth in Scotland has dropped by two-thirds over the course of 2014, according to the latest
Scotland Buy-to-Let Index from Your Move, one of Scotland's largest lettings agent networks.
Average monthly rents in Scotland are now just 1.2% (£6) higher than a year ago, with growth slowing significantly over the past twelve months from a 3.9% (£20) annual jump in rent prices seen in 2013.
This follows a monthly drop in average residential rents, down 0.4% in December to £536 per month.
Edinburgh & the Lothians is the only exception to this downtrend across Scotland, seeing an uptick in annual rent growth over the past year from 2.5% in December 2013 to 4.5% in December 2014.

Christine Campbell, regional managing director of Your Move, comments: "Annual rent growth has braked sharply over 2014, reducing the speed of rent rises to a sustainable and affordable pace.

"This is providing some welcome relief to the thousands of renters itching to jump on the housing ladder, who are already faced with enough hurdles to saving a deposit.

"Only Edinburgh is moving against the grain, as demand for homes to let keeps on banging at the gates, and fierce competition feeds bolder rent rises than elsewhere across Scotland.

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"This wider downturn in growth during 2014 marks a return to the natural market rhythm. Scottish rents were holding fast on an even keel throughout 2011 and 2012, until the abolition of tenancy fees in November 2012 sparked a new tide of unnaturally steep rent hikes. This should act as cautionary tale for policymakers considering further constricting changes to lettings legislation. The rental market is thriving by its own hand, and too much undue intervention may poison the current climate of affordability.

"Scaring landlords out of the rental market would exacerbate the current housing shortage, and wound thousands of tenants as competition hots up. Buy-to-let investment is a vital remedy for the current housing shortage, and for the health of tenant finances."

Rents by region

Overall, rents are higher than a year ago in three out of five regions of Scotland. After a strong acceleration in the pace of growth during
2014, average rents in Edinburgh & the Lothians have seen the fastest year-on-year uplift, climbing £26 (4.5%) in the twelve months to December. A 2.2% annual rise in Glasgow & Clyde takes the average monthly rent to £559 - however this still represents a significant deceleration in the pace of annual rent growth, declining
from 7.3% a year previously.
While rents climbed consistently across all regions of Scotland during
2013, the slowdown in rent growth witnessed during 2014 has been more severe in some cases - with two regions experiencing annual falls in rent prices. Average monthly rents in the Highlands & Islands are now 2.0% (£11) lower than December 2013. The South was the only other area of Scotland to experience an annual fall, with average rents down 1.8% over the past twelve months. The average monthly rent in the South of Scotland now stands at £484, down from £493 a
year previously.

Monthly rents in December: By region

In December, rents fell in three out of five regions of Scotland. After making substantial gains throughout the year, the greatest monthly drop in average rents was in Edinburgh & the Lothians, easing back 1.1% (£7) from a record high in November to £611 per month. Glasgow & Clyde experienced the second biggest fall, with rents decreasing 1.0% (£6) in the month to December. In the South rents dipped by 0.3% between November to December, while average monthly rents stayed static in the Highlands & Islands.
As the lettings market cooled overall, the East was the only region of Scotland to experience a modest rent rise in

December, with rents edging up 0.4% during the month.

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Tenant Finances

Tenant finances across Scotland deteriorated in December, as the financial strain of Christmas took its toll. The proportion of late rent in Scotland rose to 7.2% in December, the highest level since May 2013. On a monthly basis, the proportion of rent in arears has increased 0.6 percentage points from only 6.6% in November. Compared to a year ago, the financial health of Scotland's tenants has declined too, with levels of late rent up from 6.5% in December 2013.

Christine Campbell comments: "Christmas is a brutal time for bank balances, and rent payments fell by the wayside in December in the clamour of all the additional costs. But while we expect a certain seasonal setback, over the year as a whole, tenant finances have retreated. After some improvements in the summer months, the cycle hasn't been broken, and we're back to where we started - with too many Scottish households still mired in financial difficulty and struggling to pay the rent on time.

"For many, the financial hangover from the festive season is still ongoing, but record low inflation should be helping money stretch a little bit further day-to-day. Annual rent rises are decelerating, easing the pressure off some household bills, but what's needed now is wage growth to move into the fast lane. The jobs market has got more people into employment, but static salaries are stalling the long-term financial recovery of thousands of working renters."

Yields and Returns

The gross yield on an average rental property in Scotland stands at 4.0% as of December 2014. This represents a drop on both a monthly and annual basis of 0.1 percentage points; down from average gross yields of 4.1% in November
2014 and in December 2013.
Taking into account property price growth and void periods between tenants, the total annual return on a typical rental property stands at 7.8% in the twelve months to December 2014. This is an uplift from 6.6% in December 2013, but represents a slight dip on a monthly basis from 7.9% in the year to November, after a recent dip in house price growth.

In absolute terms this means the average landlord in Scotland has seen a return, before any mortgage payments or maintenance costs, of £11,962 over the twelve months to December.

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With house price growth recovering, and if the value of rental properties continues to climb at the same rate witnessed over the last three months, the average buy-to-let investor in Scotland could expect to make an overall annual return of
7.9% in the next twelve months, equivalent to £12,570 per property.

Christine Campbell concludes: "Houses prices have faltered in recent months - with an outpouring of optimism and activity immediately after the referendum giving way to a period of correction and price drops. As a result, landlord returns temporarily hit a speed bump, but that's already fading away in the rear view mirror, and the road ahead looks prosperous. Even while negotiating the uncharted terrain around the independence vote, gross yields never veered off course, driven by steady rental income.

"These favourable conditions for landlords will filter down to tenants' pockets too. As property investors expand their portfolio and invest further in buy-to-let, greater choice of homes to let will ensure rent rises remain on a smoother path."

- ENDS -

Rents 1 month Annual Yields Yields December change Change December December 2014 2013
East	£525 0.4% 2.0% 3.6% 3.7% £611 -1.1% 4.5% 3.4% 3.4% £559 -1.0% 2.2% 5.0% 5.1% £537 0.0% -2.0% 4.3% 4.4% £484 -0.3% -1.8% 4.3% 4.4% £536 -0.4% 1.2% 4.0% 4.1%
Edinburgh & Lothians	£525 0.4% 2.0% 3.6% 3.7% £611 -1.1% 4.5% 3.4% 3.4% £559 -1.0% 2.2% 5.0% 5.1% £537 0.0% -2.0% 4.3% 4.4% £484 -0.3% -1.8% 4.3% 4.4% £536 -0.4% 1.2% 4.0% 4.1%
Glasgow & Clyde	£525 0.4% 2.0% 3.6% 3.7% £611 -1.1% 4.5% 3.4% 3.4% £559 -1.0% 2.2% 5.0% 5.1% £537 0.0% -2.0% 4.3% 4.4% £484 -0.3% -1.8% 4.3% 4.4% £536 -0.4% 1.2% 4.0% 4.1%
Highlands & Islands	£525 0.4% 2.0% 3.6% 3.7% £611 -1.1% 4.5% 3.4% 3.4% £559 -1.0% 2.2% 5.0% 5.1% £537 0.0% -2.0% 4.3% 4.4% £484 -0.3% -1.8% 4.3% 4.4% £536 -0.4% 1.2% 4.0% 4.1%
South	£525 0.4% 2.0% 3.6% 3.7% £611 -1.1% 4.5% 3.4% 3.4% £559 -1.0% 2.2% 5.0% 5.1% £537 0.0% -2.0% 4.3% 4.4% £484 -0.3% -1.8% 4.3% 4.4% £536 -0.4% 1.2% 4.0% 4.1%
Scotland	£525 0.4% 2.0% 3.6% 3.7% £611 -1.1% 4.5% 3.4% 3.4% £559 -1.0% 2.2% 5.0% 5.1% £537 0.0% -2.0% 4.3% 4.4% £484 -0.3% -1.8% 4.3% 4.4% £536 -0.4% 1.2% 4.0% 4.1%

For further information please contact:

Emily Barnes, The Wriglesworth Consultancy 0207 427 1403

Melanie Cowell, LSL Property Services 01904 698860

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METHODOLOGY:

The index is based on analysis of approximately 3,000 properties across Scotland. Rental values refer to the actual values achieved for each property when let. Gross yield figures are unadjusted, and do not take account of void periods or arrears. Annual returns are based on annual rental property price inflation and void-adjusted yield twelve months prior to the reference month. These figures are subject to revision as more data becomes available.
This Buy-to-let index has been prepared by The Wriglesworth Consultancy for Your Move, part of LSL Property Services. It has been compiled using information extracted from Your Move's management information. The copyright and all other intellectual property rights in the Buy-to-Let Index belong to LSL. Reproduction in whole or part is not permitted unless an acknowledgement to LSL as the source is included. No modification is permitted without LSL's prior written consent.

Whilst care is taken in the compilation of the Buy-to-Let Index, no representation or assurances are made as to its accuracy or completeness. LSL reserves the right to vary the methodology and to edit or discontinue the Buy-to-Let Index in whole or in part at any time.

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