The private rental market could change everything in Scotland
The Scottish housing market could be defined by investors purchasing land in order to build apartments for the rental market.
These kinds of developments are likely to become as common as student accommodation and even though these kinds of developments are mainly seen in London, it is likely that investors are going to look to Scotland because of the higher yields. From 2019, it is predicted that residential property for rent in Scotland will deliver a 3-4% return each year.
This is just the beginning of this cycle and if the developments are built successfully then it could completely change the game.
In many Scottish cities, the price of property is below the prices seen in 2007 and this is very different to London as prices there are higher. In Glasgow, Aberdeen and Dundee, private rental yields are some of the highest in the UK at 7.2%, 5.6% and 5.9% respectively.
However, supply of private rental properties does not meet demand in Scotland and this provides an buy to let property investment opportunity for investors. The political situation in Scotland is also making it easier for investors, despite the political concerns about Brexit.
Currently, a lot of investment that comes into Scotland comes from overseas and this is mainly down to the decision to leave the EU and the drop in the value of the Pound. In contrast to this, funds into Scotland have been a little slower because of the political risk that Scotland has been labelled with.
In order to increase investment into the built to rent sector, the Scottish Government is considering a rental income guarantee scheme. This would lower the risk for investors while relief on the additional dwellings supplement on the purchase of more than six units will also make a difference. There are also mid-market rent schemes that can take advantage of five-year funding.
It has also predicted that average rental price will increase by around 2-4% each year and this enables investors to purchase property that will provide an income over a number of years. They will also be able to benefit from capital appreciation in those areas where property is in demand and so they will not only make money from the rental income.
This opportunity of investing in apartment blocks in urban areas is very similar to the opportunity that arose when student accommodation was high on the list for investors around ten years ago. Therefore, there is every possibility that this could become as successful as the student accommodation market but only if the right units are built in the right location because finding tenants will be the easy part.
Demand is growing and there are already success stories in place where a large number of applications ae being submitted for a small number of units in comparison.
Things are moving in the right direction but at a slow pace but there is no doubt that the interest and opportunities are there and that has caught the eye of many investors.