Private Rented Sector is shrinking for the first time

The private rented sector (PRS) in Scotland is shrinking for the first time since tenants deposits were lodged with tenancy deposit scheme providers. The total number of tenancies with a corresponding protected deposit has started to drop for the first time ever because the total number of properties available to rent is reducing.


Symptoms of a shrinking sector

This should not be news to anyone working in or around the PRS in Scotland. The symptoms of chronic undersupply have been visible for years as open market rents have continued to rise rapidly and prospective tenants have found it harder and harder to secure a new tenancy. As we enter the peak time of year, the vast majority of tenants find themselves “locked out” of the PRS with an average of 800 enquiries a week for every property advertised for rent.


Why is the sector shrinking? 

Despite more people than ever needing to rent property, the size of the sector is shrinking because of Scottish Government policy making and rising interest rates making it less financially viable. Firstly, there is an open agenda from policy makers about driving individual landlords out of the sector and the policies are having their desired effects. It’s never been more expensive to be a landlord in Scotland and the risks of being a landlord are higher than ever due to the restrictions on ending tenancies.

Rising interest rates mean that investing in a buy-to-let property using mortgage borrowing is increasingly unaffordable. This means the number of investor landlords and properties coming into the PRS are dropping significantly


What will happen next? 

Rising interest rates could, surprisingly, lead to some much needed new stock coming into the PRS. Many property owners are now struggling to sell properties that they are not living in; these are properties that they previously lived in or rented out that they’ve not been able to sell for their desired price. This could mean that the PRS starts to grow again if enough prospective sellers give up on the sales market and decide to rent their properties out instead. This would help a rental climate in Edinburgh where the chances of successfully renting a property on the open market right now are worse than 100/1.

If you own a property that you might consider renting out in Edinburgh, or the surrounding areas, get in touch with us today to discuss how easy it is to get started.