Is the rent you are get too low for all the work you do?
Or do you keep rents low to keep stable tenants and dodge voids?
Key-Lets have been managing let properties for over 27 years in Ayrshire, Renfrewshire, and parts of Glasgow. Over the years rent levels in Ayrshire have remained far below Glasgow rents.
When you ask why, there are the usual comparisons around country and city living. How wealthy tenants in cities compare with their poorer compadres in market towns. Where facilities are better in cities and life is faster, better, and more rewarding.
All true points. Yet why is a two-bedroom flat in Denniston achieving £100 more per month than the equivalent in Ayr? Both are modern flats with en-suite, private parking, and secure entry. Plus, their purchase prices are not vastly different.
I believe inertia is the real influencer in the local market and it is time for Ayrshire landlords to review their rents before rent caps, freezes or reductions come knocking.
In November 2020 The Scottish Government issued their Private Sector Rent Statistics Report covering rents from 2010 to 2020. In it they found ‘five areas (Ayrshires, Dumfries and Galloway, North Lanarkshire, South Lanarkshire and West Dunbartonshire) have seen average rents rise less than the rate of inflation across all property sizes between 2010 and 2020’. Moreover, rents in the three Ayrshire Councils for 2-bedroom properties fell by 0.6% in the same period.
Below is a comparative chart of how Ayrshire fared over the decade.
Source: Private Sector Rent Statistics, Scotland, 2010 to 2020.
Page 29 of the report breaks down the statistics using property size over the period. In each graph the projection is flat lining over the ten-year period. With 2-bedroom properties rents performing consistently lower than the Scottish average, resulting in a difference between £469 per month in Ayrshire compared to the Scottish average of £689 pm.
Ayrshire rents are low, in a low rent Scottish market when compared with the rest of the UK.
Homelet, a national referencing and landlord insurance business, provide a useful tool to compare Scottish rents with others around the UK. The following graph taken from the site (29.1.21) compares average rents between the UK average and Scotland in the last 12 months.
Another great provider of rental statistics are the quarterly reviews produced by Citylets, an Edinburgh based property portal. The figures are slightly behind the times, however the latest report provides lots of intel on rentals in Scotland’s main cities.
IS AYRSHIRE BEHIND THE CURVE?
The three Ayrshire council areas: East, South, and North have some economic issues, yet there are international pharma and air related businesses centred here. Prestwick is one of the two UK air traffic control centres, yet the airport had to be bought by the Scottish Government in 2013 to save it from failure.
The Ayrshire economy is not thriving as it should be and there seems little political effort to build economic growth. With a sleeping local economy there are limited incentives encouraging new people into the area. Even with the upgraded A/M77.
Ayrshire’s Private Rented Sector (PRS) housing stock includes many ex-local authority housing stock, and new town developments bought as buy-to-let investments. In the last few years there have been an increasing number of new build developments, although these are usually larger, high value houses situated at the margins of towns.
ARE LANDLORDS KEEPING RENTS LOW?
In Pre-COVID times the Ayrshire Councils organised several landlord conferences. Speaking to many landlords I got a common response to low rents. Simply a reluctance to upset long term tenants by increasing rents. Indeed, self-managing landlords preferred to set rents lower than letting agents to get quick turn arounds (voids) between tenancies. Usually, the rental difference reflected the 12% monthly commission agents charge.
This is all well and good, however such timid strategies mean rent levels will remain low.
The same applies to rents paid through Universal Credit. These payments are tied to local reference rents, which in turn are based on market rents. If PRS rents stay low, benefit rent levels stay low.
I do not see the logic of lowering rents to undercut letting agents. Effectively landlords are throwing away additional money each month for the spurious advantage of a shorter turnaround between lets. Since most benefit tenancies run long term, such depressing strategies only benefit the Chancellor.
This is also true for landlords who let rents devalue over time rather than regularly increase to keep in line with current letting agent values. It always surprises me at how many landlords rate being socially generous over financial fidelity.
RENT CAPS, FREEZES AND REDUCTIONS
The PRT lease attempts to dissuade landlords from regular rent increases. The Scottish Government PRT lease requires three months’ advance notice and an increase form to be issued to the tenants before any rent rise. The form is available on the Tribunal website together with guidance.
Tenants are made fully aware of their rights to contest a rent increase. They can also request a rent reduction if they consider their rent is too high for the local market.
The Scottish Government can designate specific areas as Rent Pressure Zones (PRZ) where a local council can prove rents are rising too fast, tenants are having problems to meet rent increases, councils are under pressure to provide housing, or unable to meet the cost of housing subsidies due to rising rents.
The PRZ will cap any rent increase within the designated area.
Rent is a hot topic among tenant unions, charities, and organisations. A good example are the demands from Living Rent, a tenant pressure group in Scotland, lobbying for wider rent controls in the Scottish private rented sector.
I urge landlords to look at their rent levels and regularly increase them as it will be only a matter of time before rents are further limited by Government action. Rent reviews apply to both self-managing landlords and those with letting agents.
It is too easy to let rental returns slip year on year. So regular checks on what letting agents are achieving every six months on Rightmove.co.uk or OntheMarket.co.uk is worthwhile.
If any landlord wants more information on how to increase rents, tenancy reviews or any other aspect of letting please give me a call on 01292 289289 or reach out to [email protected]. I and the team will be happy to help.
Key-Lets registration is LARN1903012.
Call Tim on 01292 289289 or Email: [email protected]
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