UK: Rent controls and ongoing political uncertainty are impacting investor appetite for Scotland’s BTR sector, according to a new report released by The Scottish Property Federation.
A series of interviews with institutional investors, conducted by Rettie & Co for the SPF, discussed the impact of Scotland’s six-month rent freeze and recently-introduced three per cent rent cap on the Scottish BtR market. Of the 14 investors interviewed, with a combined £15 billion of BTR assets, nine judged Scotland to be unattractive, including four who view the country as “un-investable under current conditions”.
Scotland had been experiencing strong BTR growth in both Glasgow and Edinburgh in recent years. The country’s pipeline sits at around 17,000, but 67 per cent of these are in planning including 6,000 properties with planning permission where construction is yet to begin on site.
David Melhuish, director of the Scottish Property Federation, said: “The impact of the emergency legislation on the BTR market over the last six months is clear. The lack of long-term policy certainty means investors largely view Scotland as a risk, compared with more stable locations in other parts of the UK. This situation is a disincentive to investment and as a consequence, investors are going to continue to divert capital elsewhere. The rental market in Scotland, and crucially renters, will continue to bear the brunt as new housing supply is constrained and demand for accommodation soars.”
“At a time when we need more housing and a quality rental sector, investment in Scotland is reducing. The industry and the Scottish Government should be working together to ensure Build-to-Rent investment is flowing into the country,” he added.
Dr John Boyle, director of Research at Rettie & Co and the main author of the research, said: “Our work clearly shows the potential for BTR in Scotland as part of the answer to the housing crisis. However, the sector has been stymied by what investors consider to be high levels of political risk. The recent emergency legislation has elevated these risks and less supply will come forward as a result, which will have consequences for affordability and availability of properties for rent in Scotland.”
Last month we reported that BTR operator Get Living put a £200 million BTR and PBSA development in Glasgow on hold, citing the rent control policy and market conditions.
“The ongoing policy on rent controls in Scotland combined with current market challenges has resulted in a shift in investor support, meaning that the viability of this development is now uncertain. Whilst it remains our ambition to be part of the solution to the city’s housing shortage, at present we are unable to proceed with the scheme against this background and we hope that the Scottish Government will reconsider its stance,” said a Get Living spokesperson.
