There have been plenty of alarming phrases rolled out in recent months on the housing situation in Scotland. From a renter’s point of view it is often described as an “emergency” or “crisis”, while landlords are said to be facing a “perfect storm” of financial pressures.

Where does the truth lie?

Edinburgh made it official two weeks ago when city councillors followed their counterparts in Argyll and Bute in declaring a housing emergency, citing record homelessness, a severe shortage of social rental homes, and spiralling private rental costs. Council figures show there are approximately 5,000 households in temporary accommodation in Edinburgh, the highest in Scotland.

READ MORE: 'Chronic lack of social homes': Edinburgh declares housing emergency

The capital has been ground zero in the debate over the impact of short-term lets on the availability of properties for long-term rental, and while the amount of Airbnb-style accommodation across the country has surged in recent years, the deep-rooted pressures on the housing system are playing out in a way that appears to have few clear-cut winners.

According to the owner of one local agency in Glasgow, the city’s lettings market is the strongest it’s been in roughly a decade. For a one-bed flat marketed at the height of summer, Rosevale Letting can receive in excess of 150 enquiries within 24 hours.

“Rental returns are the strongest we’ve seen for the last seven to eight years or maybe even ten years,” Rosevale founder Riccardo Giovanacci said.

“This time three years ago, a one-bed flat in Glasgow’s West End might have rented for £650 to £700 a month, or maybe £750 on a good day. Now that same flat will be going for £1,000 a month.”

Lack of rental stock has been the main driver of this, with many landlords choosing to leave the market.

“Property values have rapidly increased and a lot of people who had become accidental landlords over the last 10 to 15 years had an opportunity to get out of the market,” Mr Giovanacci said. “But those landlords aren’t being replenished.”

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By the end of 2023, residential estate agent Hamptons estimates that individual landlords across the UK will have sold 294,300 more homes than they’ve bought since 2016, when a raft of tax and regulatory changes were introduced. While institutional investment in the private rented sector through build-to-rent schemes has filled some of the gap left by private landlords, overall there were 43% fewer homes available for tenants to rent in the first 10 months of this year compared to the same period in 2015.

Figures published yesterday by Hamptons show that the sell-off by landlords is starting to ease everywhere but in Scotland, where the Scottish Government’s temporary rent cap of 3% has been blamed for driving landlords out of the market.

Private landlords have accounted for a record 12% of all sellers in Scotland so far this year, up from 10% in 2022. Purchases have meanwhile fallen to a record low of just 6% of all homes sold, the lowest in Great Britain.

That said, Scotland’s rent control only applies to existing tenants, meaning landlords can go higher when drawing up new tenancies. Faced with rising costs and a limit on future increases, this loophole has been used to maximum effect with rents on new tenancies in Scotland rising at a faster pace than anywhere else in the UK.

READ MORE: Loophole in ScotGov rent cap blamed as bill rises hit record levels

Figures from property platform Zoopla show that the average rental in Scotland was £750 per month in September, up by £90 or 12.8% from the same period a year earlier. The average increase across the UK was 10.3%.

Zoopla found that rents are growing at the fastest rate in Edinburgh (up 16.3%), Dundee (up 14.6%) and Glasgow (up 13.6%). 

Marcus Di Rollo, lettings director at legal firm Gilson Gray, said the move to license short-term lets is leading some landlords to shift their investments from hot spots such as Edinburgh into Tayside. Buoyed by waterfront regeneration, the proposed development of the Eden Project, and the arrival of a new 4,000 seat e-sports arena, Dundee could ride this trend to become the new “buy-to-let capital” of Scotland.

“All of this is filtering through to the property market and we can see that in this year’s rental figures,” he said.

“In comparison to other Scottish cities, the barrier to entry in Dundee is relatively low. You can invest in a portfolio of properties – perhaps as many as five or six – for the cost of one equivalent flat or house in Edinburgh and the yield can be as much as 10%.”

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Based on an analysis of figures from Citylets, Gilson Gray says Dundee recorded the highest increase in rents during the past 12 months.

Across all sizes of property rents in Dundee rose by 16.9%, with Edinburgh just behind at 16.5% and Glasgow and Aberdeen on 15.6% and 7.8% respectively.

Over five years only Glasgow has had stronger average rental growth of 53.9% compared to 53.6% in Dundee. However, over 10 years both Glasgow and Edinburgh have seen substantially higher rental increases – 88.5% for Edinburgh and 95.5% in Glasgow, compared to 67.2% in Dundee.

The affordability of private renting in the UK already at an all-time low, with private renters on average needing to set aside 28.4% of their gross earnings – the most in more than a decade. A householder on an average wage is now left with less than half of their salary for other expenses after tax.

If Zoopla is right in its estimation that rental inflation will remain above 9% for the rest of the year, affordability will become even more stretched.

Rent control in Scotland has provided some degree of protection but on the whole has failed to keep a cap on the spiralling cost of letting a property. What is needed is a much bigger pool of affordable social housing which was largely drained by the “right to buy” boom that kicked off in the 1980s, and from which the housing market has yet to recover.