RENTS in Scotland have hit a record high as an extra charge for buy-to-let home purchasers has put off potential landlords.

A new report from Your Move shows that typical monthly rents have risen by 1.3 per cent from £542 in April to £549 in May and has raised concerns about the ability of tenants to afford homes.

The Your Move report indicates things could get worse as the new Private Tenancies Bill brought in in March introduces rent controls which they fear will drive even more current and potential landlords away.


Edinburgh & the Lothians has witnessed the biggest annual regional rise with rents up 12% (£69), says the report.

But it was Glasgow & Clyde that saw the biggest month-on-month rise with rents in the region increasing 1.9% from April. This amounts to a £11 jump in cash terms, with typical rents increasing from £538 in April, up to £549 in May.

The smallest monthly upswing was in the Highlands and Islands where rents went up by just £1 to £538.

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Your Move say the rise has been brought about by a shortage of homes to rent, because of the increased costs in buying second homes.

And they say the rises come against a background of Scottish tenant arrears climbing for the third successive month.

The proportion of late rent increased to 12.5% of all rent due in May, compared to 11.6% in April. On an annual basis, tenant arrears have worsened too, with late rent standing at just 8.8% in May 2015.

Scotland's Finance Secretary John Swinney announced in December that there would be an additional supplement of three per cent of the purchase price of the property, on top of the existing Land and Buildings Transaction Tax (LBTT).

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The move follows a similar announcement by the UK chancellor the previous month.

The Land and Buildings Transaction Tax (LBTT) replaced UK stamp duty in April.

Brian Moran, lettings director at Your Move Scotland, said: “Rents are rising rapidly as a result of the new Land and Building Transaction Tax surcharge for buy-to-let properties. This tax hike has dissuaded landlords from investing in the sector leading to a shortage of homes to rent, compared to the demand for housing.

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"With the limited supply of rental properties, potential tenants have been forced to compete to secure homes, pushing up rents. The introduction of this anti-landlord legislation from Holyrood has ensured the cost of the policy has hit tenants hardest."

He said that since the SNP came to power five years ago, monthly rents have increased by an average of £40.

And he says rent controls in the Scottish Government’s private tenancies bill will only treat the symptoms, not the cause of rising rents.

"By limiting the rent that can be charged on a property, becoming a landlord will become less appealing, limiting investment and forcing many to consider leaving the sector," said Mr Moran. "This will lead to an even greater shortage of homes to rent. In addition, without the potential incentive of higher rents, landlords will lack the motivation and finance to improve the quality of their properties.

"The Government needs to look at incentivising landlords to increase the supply of rental properties in Scotland. With more homes available to rent, tenants wouldn’t need to compete for properties and rents would be more affordable."

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He also warned: "With employment in Scotland falling by 48,000 between February and April, some tenants may be struggling to make ends meet.

“With increasing costs of renting and less employment in Scotland, tenants will need additional support from landlords. But the Government’s policies are instead turning the screws on landlords; driving a wedge between them and their tenants.

"The Government appears to have adopted a strategy of scapegoating landlords, instead of addressing the low wage growth, limited housing supply and state of the Scottish economy.”

Dr John Boyle, Rettie and Co's research and strategy director echoed the concerns saying: "We need to be encouraging supply by setting up a framework that incentivises small and larger landlords to enter the sector and meet the demand. However, considerable political intervention and noise over issues like rent controls is only hindering this needed investment."

A Scottish Government spokesman said: “The Office of National Statistics most recent official statistics show that private rents in Scotland increased by 0.5% over the last year (April 2015 – April 2016), so considerably lower than the 2.8% jump seen in England.

“The policies we have enacted ensure we are supporting tenants and those looking to buy an affordable home. We are committed to building a further 50,000 affordable homes, with 70% for social rent; our Private Housing (Tenancies) (Scotland) Act provides a balance between protecting landlords’ investments and ensuring stability and security for tenants in their homes; and through LBTT, we are removing any market distortion, particularly at the lower end of the Scottish market.”

The LBTT system, which raised £218m in its first seven months, uses a graduated tax rate, working in a similar way to income tax.

Under LBTT, properties bought for up to £145,000 do not attract any tax.

For sales between £145,000 and £250,000, a tax rate of 2% applies, with the introduction of a new rate of 5% between £250,001 and £325,000.

Between £325,001 and £750,000, the marginal rate is 10%, with a top rate of 12% applying to all transactions above £750,000.