SCOTLAND'S buy-to-let market is booming in its biggest cities as a result of the credit crunch and global stock-market volatility, according to experts.
A record number of people have being searching for homes to rent, rather than trying to buy their first property – a sign the current economic uncertainties are affecting the house buying market.
This boost to the residential letting sector ma
kes it a good time for existing landlords, although the unsettled economic conditions are not ideal for those considering entering the buy-to-let market.
The country's biggest letting portal, Citylets, says it has experienced its busiest January to date, with more than 80,000 searches for property to rent in Edinburgh and Glasgow during the month. In Edinburgh, that is a rise of 27 per cent on January last year, while for Glasgow it represents a 20 per cent increase.
Thomas Ashdown, Citylets' managing director, said: "It only stands to reason that we are seeing an increase in demand in the letting sector, something we have been expecting over the last six months, but we're all a bit taken aback at the size and speed of the increase. Most noticeably, demand for two-bed properties in Edinburgh has shot up by almost 34 per cent."
Ashdown said this was a result of people being wary of buying homes and others simply not being granted mortgages as lenders' criteria become stricter.
He added: "This will drive more people to rent, and for longer, and we expect the demand for properties will continue to soar well into the third quarter of 2008. This is good news for landlords and their agents, but tenants should expect to see rent rises in some areas."
Evidence of rising demand for rented accommodation in Scotland's two biggest cities should help reassure landlords who have been worried about talk that the buy-to-let bubble could burst.
But commentators say landlords would do well to remember that residential property – like other investments – should be viewed long term, rather than a way to earn a fast buck.
Stuart Turner, financial planning consultant at PKF business advisers and consultants, said: "Existing buy-to-let landlords looking to add to their portfolios are currently the ones best placed to ride out the volatility.
"The grass is not as green for amateur landlords with one or two properties who will struggle through any void periods.
"Landlords who will be successful are ones who are in it for the medium to long term."
To demonstrate the potential for long-term gain, Braemore Property Management in Edinburgh has carried out a study of the sector over the past 15 years.
The analysis has shown that landlords who got in early have enjoyed astonishing returns on property values – in one case 692 per cent.
Braemore chairman William Frame said: "The rental market in Scotland, and particularly in Edinburgh and the Lothians, has undergone huge changes in the past 15 years.
"Property has now become an asset class in its own right – competing easily with complementary pensions, share portfolios and other forms of investments and savings.
"Today, landlords and tenants alike benefit from a buoyant property market, boosted by demand from the professional services sector, a wide choice of property and a wide choice in funding, representing a major cultural shift from the renting industry of yesteryear."
He added: "The buy-to-let market still offers excellent long-term rewards – but only if you stick with the ups and downs."
And Peter Curran, head of Intermediary distribution for Bank of Scotland mortgages, said: "As Scottish rental yields continue to outstrip the rest of the UK, the Scottish buy-to-let sector is likely to remain an attractive area for investment."
The full article contains 627 words and appears in The Scotsman newspaper.
