Rettie & Co.’s latest briefing for Scotland shows a rise in the number of operating and pipeline Build to Rent homesto over 13,000 homes, up 25% in a year.Glasgow has experienced the greatest rise with approximately 7,400 homes, followed by Edinburgh with around 4,300 and Aberdeen with around 1,100.The total value of such schemes in Scotland is approximately £3.5bn.
The briefing also indicates that there is room for further growth, with Build to Rent representing 2% of all households in Glasgow and Edinburgh in comparison to nearly 6% in Manchester.
Homes for Scotland has estimated the need for 25,000 new homes a year across all tenures to meet current demand – the current ten year average is 17,000. However, the Scottish Government’s rent freeze announcement is expected to dampen investor interest in Scotland and lead to the postponement of new units for rent.
“As in the rest of the UK, the Build to Rent sector has continued to grow in Scotland in the last year, and despite the pandemic, developer and investor commitment to the sector remains strong. Once fully up and running, Build to Rent will become a major provider of housing in Scotland and generate significant economic impact. However, the Scottish Government’s rent freeze announcement has created a lot of uncertainty in the sector, and further clarity on how this is going to work, and over what timespan, is quickly needed.”Dr John Boyle, Director of Research & Strategy, Rettie & Co.
The briefing also shows that the Build to Rent pipeline in Scotland has continued to grow throughout the pandemic. Pre-pandemic, there were just over 9,000 units in the Build to Rent pipeline in Scotland. This increased by over 50% between 2018 and 2019. In 2020 the year-on-year rate of increase slowed, rising by 7%. However, in 2021, over 2,500 units were added to the pipeline; a year-on-year increase of over a quarter.
The concentration of supply in Scotland remains in the two largest cities, with half of the pipeline in Glasgow and a third in Edinburgh. The total pipeline of 13,116 homes includes 7,392 in Glasgow; 4,327 in Edinburgh; 1,094 in Aberdeen; 228 in Dundee; and 75 in Perth. It is anticipated that the figure could change if some of the current proposals, which consider Build to Rent as a component of major masterplans, come to fruition.
The briefing also shows that rents in Scotland have been on an upward trend over the past decade, with the exception of Aberdeen. Historically, Edinburgh has seen the strongest growth, but the upward trajectory of the capital slowed during the pandemic due to reduced rental market activity. Since lockdown eased, growth recovered, with average rents rising 15% in the past year. Over the past five years Glasgow outperformed Edinburgh, with average advertised rents rising by 32% in Glasgow and by almost a quarter in Edinburgh.
A key issue the briefing identifies is the falling supply of stock. Against this falling supply, demand remains strong, and as interest rates rise and the cost of house purchasing increases, it is expected that the number of households choosing the rental sector will increase.
“As we have outlined in the briefing, Scotland and its main cities are well placed to benefit from Build to Rent expansion, but if the Scottish Government wants a thriving Build to Rent sector, and sees it as part of the solution for the housing crisis, it needs to quickly reassure institutional investors looking to fund this significant increase in the supply of homes that this is purely temporary measure.”Dr John Boyle, Director of Research & Strategy, Rettie & Co.