Average Monthly Rent Falls

22 October 2014, 06:02 | Updated: 22 October 2014, 06:21

Rents in Scotland fell by 0.2% in September, the first monthly drop in three months, according to a new report.

The average residential rent in Scotland now stands at £536 per month, dropping from a record high in August, the latest Scotland Buy-to-Let Index from Your Move found.

Average residential rents across Scotland are still 2.0% higher than a year ago, but this represents a slow-down of growth on an annual basis.

Annual rent rises have eased off from 2.7% last month, and dropped from a 3.1% annual change in the year to September 2013.

Rents fell on a monthly basis in four out of five regions of Scotland in September, with Edinburgh and the Lothians the only area reporting growth.

Housing experts warned that the pace of growth could cool further after the latest LSL Landlord Survey found landlords expect rents to rise just 1.8% over the next 12 months.

Gordon Fowlis, regional managing director of Your Move, said: "Talk of tenancy reforms to cap rents seems widely out of touch with reality. The private rented sector is hardly a runaway train that needs reining in - rent rises are slowing on an annual basis and retreating back in line with the target rate of inflation.

"The last time the Scottish Government tinkered with lofty lettings legislation, their good intentions didn't filter down to the thousands of everyday renters on the ground. The abolition of one-off tenancy fees hoisted rent rises up to an artificial pace after years of stability.

"Now, adding more strings to the web of legislation encircling landlords may push them to cut loose altogether, as well as stop attracting new buy-to-let investment. In this way, rent controls will actually accelerate rent rises from the healthy trajectory they are currently on.

"At a time when the country is facing an acute shortage of housing, and as the Government is already increasing the tax burden on many home buyers with their Land and Buildings Transaction Tax (LBTT), putting a cork in supply will only sour tenant finances.''

The report found that taking into account price growth alongside void periods between tenants, the total annual return on an average rental property stands at 9.5% in the 12 months to September.

This means the average landlord in Scotland has seen a return, before any mortgage payments or other deductions, of #14,392 in the last 12 months.

The report found that if rental property prices continue to rise at the same pace as over the last three months, the average buy-to-let investor in Scotland could expect to make a total annual return of 5.0% over the next year, equivalent to #8,019 per property.

There was a slight improvement in the health of tenant finances last month, with the proportion of late rent at 6.4% in September, down from 6.5% in August.