By Marcus Di Rollo, lettings director at full-service legal firm Gilson Gray
So far, the 2020s have seen a lot of change in Scotland’s housing market. Rents and house prices, surprisingly to some, went up considerably during the pandemic as people’s needs and wants from their homes changed.
The rent cap introduced by the Scottish Government during 2022 aimed to control some of those effects. However, it seems to be widely accepted that the policy became self-fulfilling, leading to even greater rises in rents for many tenants and casting a shadow over the lettings market over the past couple of years.
With the coalition that introduced the legislation now over, the Housing (Scotland) Bill making its way through the Scottish Parliament, and a new government in Westminster, the foundations of more change in 2025 have already been set. Here are the themes we believe will shape property this year.
Supply-demand imbalance to remain
The rental market is still relatively buoyant. A big part of the reason for that is the perennial supply-demand imbalance in most of Scotland’s main property markets. Many landlords have decided to sell up due to a combination of factors, but that is only further restricting the availability of properties for those who want to rent. With little in the way of new development in recent years, this situation is unlikely to correct itself in the short term.
Clarity over Private Rented Sector (PRS) policy
A big contributor to the mismatch between supply and demand in recent years has been the uncertainty over rent policy. But, with the Housing (Scotland) Bill currently going through the Scottish Parliament and expected to be finalised by late spring 2025, we should reach some form of conclusion next year. Hopefully that will provide enough clarity for landlords to make decisions and may provide the certainty needed for developers to deliver a new wave of homes.
More discussion over eviction process
The second, perhaps less discussed, aspect of PRS policy is evictions. Arguably, this has been just as much of an issue as rents when it comes to assessing the viability of new development. As things currently stand, a tenant has to be in three months of continual arrears for the eviction process to begin. The process itself could take a couple of months and then an enforcement order follows, which may take several weeks more. That means potentially six months without any return on their asset, while covering costs – an unsustainable risk for many potential and current landlords. More discussion over the topic of evictions seems likely during 2025.
Rents recalibrating
The mismatch between supply and demand notwithstanding, there has been a definite shift in the market in tenants’ favour. The large rent increases of the pandemic and its immediate aftermath have slowed and there is evidence that, in some areas, there is even a bit of a correction underway. That said, broadly speaking, we expect rents to remain flat or go slightly up in most parts of the country. The temporary rules around rent increases are still in effect, largely limiting any rises to 6% – in some exceptional cases, that may go up to a maximum of 12%. But between 5% and 6% is likely in some of the stronger performing areas and lower elsewhere.
Uncertainty over short-term lets
Short-term lets have been a contentious issue since the introduction of new licensing and planning systems in Scotland. But, with so many variables still at play, it is difficult to know what will happen. Figures we recently obtained from the City of Edinburgh Council showed that, although licenses are being granted to homeowners renting out their properties as short-term lets, they are coming unstuck by planning, with 90% of applications being rejected. That will continue to place a big question mark over what happens in the city’s property market, both in terms of house prices and rents.
