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Renting in 2022: what landlords in Scotland need to know

2020 and 2021 have been undeniably difficult years. However, now it's time to look forwards and consider what landlords - and investors - should be thinking about as we move into 2022.


1. The size of the private rental sector

2020 figures from the Scottish Household Survey put the country's private rental sector at 325,649 properties. This was 50,000 fewer than the figure for 2016 - the high point - although three times larger than the figure for 1999. Although on the face of it, the dwindling numbers over the four years prior to 2020 (2021's figures are not yet publicly available) might seem concerning, there are good reasons for them. Firstly, the explosion in Airbnb and other short term lets prompted many landlords to eschew longer term lets in favour of shorter and often more profitable ones.

Secondly, the changing taxation and regulatory landscape was enough to convince a second group to leave the rental game altogether. Third, and perhaps least palatably, is down to a growing number of unregistered lets. Altogether, however, looked at from a purely numeric basis, there is still plenty of demand for rental homes in Scotland. Of course, specific problems - furlough, work from home, the sudden absence of many overseas tenants etc - caused by the pandemic have affected this, particularly in the short-term. Overall, there has been no particular rise in the numbers of people choosing owner-occupied housing over rental stock. This should therefore provide comfort to existing landlords as well as anyone contemplating investing in the sector.


2. New investments: pick your city

As an investor, you may have a certain degree of flexibility in deciding where to purchase properties. While Edinburgh remains the Scottish city with the highest number of rental homes, its sold property prices can be both difficult to meet and lead to less than satisfactory yields. Fortunately, other Scottish cities are available. Take Dundee, for example. Although it has fewer private rental homes than Edinburgh (an estimated 20,000 as against 62,000), as a percentage, those rental homes make up 27 per cent of Dundee's housing stock. Meanwhile, Edinburgh's 62,000 properties equate to 25 per cent of the city's housing. The difference may be relatively small but, as any investor knows, even fractions of a percentage can make a real difference to returns. And, thanks to its burgeoning student population, rental homes in Dundee are in high demand, making the city a good choice for those happy to invest in the student market.


3. What tenants want from their homes

It's always been important to remember that while a rental property is an investment on its own, it is a home to its occupant. Consequently, a good investor looks at a potential property through the eyes of a potential occupant and asks themselves: does this property meet this occupant's needs? Exactly what those needs are will vary according to the tenant - which itself underlines the importance of picking a demographic and broadly sticking to it. After all, a one-bedroom flat close to lively bars and restaurants is more likely to appeal to a young professional while a three-bedroom tenement property opposite a park with a playground could be a better fit for a family with young children.

If nothing else, from the perspective of landlords and investors, the pandemic has both altered and highlighted exactly what tenants are now looking for from their homes. For example:

-Outdoor space. Although Scotland's long winters and less than balmy average temperatures might seem to mitigate against long lazy days in the great outdoors, Scottish residents have proven themselves no less keen to live somewhere with outdoor space than anyone in England, Wales or Northern Ireland. If you need proof, just ask any estate agent. Demand for homes with private balconies, roof terraces, gardens or, at a pinch, shared outdoor space has been selling and letting at a faster rate than properties without such space. As a result, if you have the choice and can afford the likely premium, pick a property that will give its tenants their own outdoor space.

-Space to work from home. With the home-working trend looking set to continue for the foreseeable future, all sorts of tenants are looking for properties to facilitate this. For a single professional, this might mean looking for a two-bed home instead of a one-bed. For a family, it might mean choosing somewhere with a garden office or a second reception room that can be repurposed during working hours. While, as landlord or investor, it's obviously not for you to determine how a tenant uses the rooms in their home, you may be more likely to let to your chosen demographic if you've bought or renovated a particular property only after thinking about how it could accommodate working from home. A potential alternative is if a property is located close to coworking facilities that are popping up across large cities including Edinburgh.

-Equal-sized bedrooms for sharers. The days when sharers were happy to toss a coin for the bigger bedroom are rapidly receding. Nowadays, most sharers prefer roughly equal-sized bedrooms, which is something landlords happy to rent to this demographic would do well to remember. Of course, flats with two double bedrooms almost always go for higher sold property prices than those with one double and one single but you can reflect this difference in the rent and, as a bonus, may hope to let the property more quickly.

-Pet-friendly properties. Something of a sticking point for many landlords, there's still no doubt that rental homes where pets - especially dogs or cats - are allowed are in high demand. If you're willing to consider this, you may find your property is easier to let. Some landlords try to minimise the risk by stipulating, for example, a maximum number of pets or even their size, taking a pet-centred reference from a previous landlord or asking for a higher deposit.

-Greener living. Growing eco-awareness is already translating into pressure from renters for greener homes. In some ways, as tenants, they are in a stronger position than owner-occupiers to be picky when it comes to choosing a new home that reflects their eco credentials. Features to consider range from the obvious (double or triple glazing, and good insulation) to the high tech and often expensive (solar roof panels and innovative recycling systems such as Envac, which reduce or eliminate refuse sent to landfill). Finally, if your property offers private parking, you may want to consider installing an electric car charging point.

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Source: Nethouseprices 06.01.22

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