I was discussing the latest Citylets quarterly rental report with an investor this week. The report confirms what we have been seeing on the ground in Glasgow. That is, strong tenant demand for rental properties is allowing landlords to push through above inflation increases in rent.
In the 3 months to end June, it reports that Glasgow rents grew on average 4.4% year on year to an all-time high of £685 per month. In addition, the market in Scotland’s largest city continues to move quickly with a typical property letting in just 25 days, resulting in low vacancies.
The West End, City Centre and Merchant City have the highest rents, with 2 bedroom flats renting for an average of £882 per month. They have also seen some of the highest growth in rents at 9.6% year on year growth. Other areas where there has been strong growth include Newlands (13.6%), East Kilbride (10.3%), Govan (9.1%) and Maryhill (6.8%).
The investor wanted to know my view on whether this growth was sustainable. My belief is that yes, the growth in rents and house values is sustainable and that we can expect above inflationary growth to continue for a number of years. However, I like to back my beliefs up with evidence, so I did a bit of homework.
Firstly, the population of Glasgow, after a period of stagnation, has been growing over the last 15 years and according to the General Registers Office of Scotland is expected to grow by 10% from today’s 600,000 to 660,000 by 2035. The number of households is forecast to grow even quicker – by 26% by 2035 as a result of growing population and falling average household size.
Secondly the Private rental sector has been growing quickly in Glasgow and is expected to continue. In the 2011 census, of the 286,000 households in Glasgow, 48,000 were privately rented, accounting for 17% of households (around 1 household in every 6). This is more than double where it was 10 years ago.
Despite rising demand from an increasing population, new build, rates in Glasgow are at around half their long term average after falling steeply in the economic downturn. The chart below based on data from the Scottish Government Housing Statistics show the number of new builds by quarter since 1997 for Glasgow.
So the impact of strong demand, and limited supply of new properties is driving the growth in rents and property values. These are long term trends which gives me confidence that buy-to-let investors can look forward to attractive growth for many years to come in Glasgow.
That said, the key to property investing is buying the right property in the right location. If you are considering buying a property for buy to let investment in Glasgow, at Douglas Dickson we are always happy to give you our unbiased opinion on which property to buy (or not as the case may be). Please feel free to contact me on 07984 619 124 or via email: firstname.lastname@example.org.