24 Oct 2014

Analysis: Buy to Let Investment - Going from strength to strength

Analysis: Buy to Let Investment - Going from strength to strength

Chris Comfort, Senior Solicitor, analyses the Buy to Let market in Scottish cities.

Chris Comfort, Senior Solicitor, analyses the Buy to Let market in Scottish cities.

Everyone wants to maximise their assets and create a lifestyle that is comfortable for them, not just in the present but also for the future in considering retirement. Of course this can be achieved in many ways, whether through pension plans, stocks and shares portfolios or property investment.

In recent years and after one of the worst recessions in history the world economy is struggling to recover, and while the UK economy is faring better than most the impact from the European and World markets will continue to have a large impact on UK growth. This impact is clearly seen with Euro Zone countries tittering on the brink of recession, the Chinese economy slowing as well as the wider impact from the Ebola outbreak in Africa. The UK Treasury, it seems may renege on a rise in interest rates due to the wider global impact even with unemployment figures heading towards/below the magic 7% barrier. All this does not bode well for savers, investors and pension holders in the short term.

So where can people achieve a relatively safe investment? Well it would seem that the buy to let investment market continues to grow and is going from strength to strength. Growth in this market has happened for a number of reasons. Even with the recent recession and reduction in borrowing from lenders the market in Scotland does not seem to be slowing down. 

The main factor for the growth in this market is down to a shortage of housing, combined with an increase in Scotland’s population. In 2011 the population of Scotland was 5.25million. The Scottish Government recently have projected that the population will increase by 10% to 5.76million by 2035. This rise is down to many factors, for example, greater life expectancy, more single person households, and higher net immigration. It is estimated that Scotland will need to build more than half a million homes in the next 25 years to meet this growing demand.

With these projections, it is clear that the buy to let market will continue to grow as demand in the major cities continues to challenge supply. This statement is confirmed by the recent quarterly report by Citylets. In 2014 the year on year (YOY) average Scottish rental price has increased by 7.1%, taking the average Scottish rent to £736. 

All three major Scottish cities (Glasgow, Edinburgh and Aberdeen) have performed well.  Glasgow leads the way this quarter after its buoyant summer hosting the Commonwealth Games. The city has reported an average rental growth of 8.3% with time to let (TTL) of 28 days, which is down by 11 days from last year’s report.  Edinburgh also performed well with an average rental growth of at 6.8% which is now the sixth quarter in a row that rents have increased in the city. Aberdeen has has also performed well with an average rental increase of 6.4% with 1 bedroom flats returning the best increase on rent at 9.7%.

Collectively the major Scottish cities have shown and continue to show strong rental figures. The buy to let market shows no sign of slowing down.

Chris Comfort, Senior Solicitor

     

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