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Slow Scottish Economy Paints Bleak Picture for Landlords

The signs are not good.

The Scottish economy is lagging behind the rest of the UK.

Rental incomes north of the border did not grow at all in the year to February 2017, while rising by 2.1% elsewhere in the UK, states a survey.

New tax changes may force a rent increase in the private sector of up to 30%, claims a report.

Yet most landlords do not want to push up rents because they fear their tenants will struggle with the extra cost, according to a study.

Added together it paints a bleak picture for private landlords in Scotland.

Yet every cloud has a silver lining and if you are a landlord who is concerned about your investment, then why not contact R&T Property Solutions.

Our head office is in Glasgow, where it has been for over six decades. And we are on the lookout for property all over Scotland.

If you are interested in getting out of the property business, or if you are a buy-to-let investor who thinks it is time to sell up, then we want to hear from you.

We are keen on all types of property, whether it is a portfolio of flats or a single home, or even a piece of land.

This is especially so if you are looking for a quick deal, as we normally can make an offer within 24 hours.

We’ve been around as a family business for a long time and we are not unduly influenced by the type of fluctuations which are currently causing landlords so much grief.

Fluctuations like those reported by the Office for National Statistics, which published its Index For Private Housing Rental Prices (IPHRP) recently.

The data from this Government department states: Rental growth in Scotland fell to 0.0% in the 12 months to February 2017, a slowdown from a high of 2.1% in the year to June 2015. This weaker growth may be due to stronger supply in Scotland as reported by the Association of Residential Letting Agents (ARLA).  

So Scottish rents are going down, while one industry expert believes they ought to be going up.

David Miles, professor of financial economics at Imperial College London, says that the changes to tax for buy to let landlords should be abandoned.

However, now that they have been implemented he thinks private rented sector tenants face potential rent increases of up to 30%.

He says: “Stamp duty is now being levied at a higher rate on properties bought to be rented. Most properties bought by private buy-to-let investors will pay an extra 3% in tax.

“And starting from April 2017 the rate at which interest on mortgages used to acquire buy-to-let properties can be offset against tax on rental income will be reduced from an investor’s marginal income tax rate down to the basic rate.

“The effects of the tax changes are clearly large.

“Rents would need to rise between 20% and 30% to offset them, more often than not rents need to rise by closer to 30%.”

He went on to explain that the impact on cash flows of this tax change is far greater than the impact of the stamp duty increase because the latter is paid only once and the cost can be spread over the lifetime of the purchase.

Meanwhile, rents in the UK are not surging ahead, as some had predicted.

The latest lettings index showing that they rose by an average of just 0.8% in February compared to the same month in 2016.

This marks a considerable decline in the pace of rental appreciation which was 4.7% in June last year and the month on month rise is well below the general rate of inflation which is currently 1.8%.

The figures from the HomeLet index show that the average rent is now £895 per calendar month which is just 0.8% higher than a year ago. While in London the average rent is £1,520, some 0.4% up year on year.

A breakdown of the figures show that in Scotland average rents were down 1.5% month on month to £597, some 0.8% below a year ago.

There had been much talk of buy-to-let landlords raising rent prices to cover added costs including mortgage tax relief change and the planned ban on letting fees in England, but the report suggests that they are likely not to do this in 2017.

Research from HomeLet shows that over half of the 3,726 landlords surveyed expect to have to raise rents in the face of mounting cost pressures but 29% plan to defer this to 2018 and it suggests that landlords appear to be acutely conscious of the need to ensure rents are affordable for tenants.

If, as a landlord, you are concerned about any of these factors, then call our experienced staff who will be able to discuss various options with you.

We’ll be happy to make an offer for your property, while safeguarding your tenants’ rights and agreeing terms quickly. Indeed, we can even pay cash if required.