Strong fundamentals driving growth in Glasgow with rents up 4.4% in last 12 months

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: derek.livingstone@douglasdickson.co.uk.

2 bedroom flat in Shawlands with a return of 6%

Click here to view property on rightmove 

This large 2 double bedroom flat in the heart of Shawlands caught my eye this morning. The property is being marketed at offers over £119,000, and has a home report value of £130,000. I think this is an ideal investment opportunity.

The property is located in the heart of vibrant Shawlands, a great area in the Southside of the city. Situated beside the beautiful Queens Park, Shawlands is a bustling area, great for shopping, great eateries, and has a mixture of traditional Glasgow drinking bars and trendy bars and clubs.

The flat is ideally located for local transport links. The flat is just off the A77 Kilmarnock Road which is well served by local buses and Crossmyloof train station, from where it is 7 minutes into Glasgow centre, is only 0.4 miles walking distance.

If we take a quick look at the figures, if you purchase this property at £125,000 and then rent it out at £625 per calendar month this will provide you with a great yield of 6.0%.  This property is well worth a look!

Shawlands is popular with renters so renting the flat out should not be a problem. If you are interested in this property or want to invest in the Glasgow area, why not give me a call on (0141) 221 1827.

Regards

Derek

PS It is always a good idea to get a second opinion.

How affordable is Glasgow property

An important factor to consider when thinking about buy-to-let investment is the affordability of property in your chosen area. One way of judging the affordability of a town is by simply finding the ratio of the average property price to the average salary. The lower the ratio, the more affordable property is.

We put this to the test. In the latest Registers of Scotland Quarterly House Price index, published in July, we found that Glasgow currently has an average property value of around £138,000 with an average salary (based on ONS data) of £24,428. This gives a respectable ratio of 1 to 5.7. Meanwhile in neighbouring East Renfrewshire, the ratio of property values to salary is 1 to 7.0, which suggests the property in Glasgow is 19% more affordable than in East Renfrewshire.

We also had a look at Edinburgh and found the average salary is £28,820 compared to an average property value of £237,286, giving a ratio of 8.2. Glasgow also comes out more affordable on this metric against Aberdeen which has a ratio of 7.6.

Unsurprisingly, London scores an eye watering 13.0 on this scale, with average house prices of £472,900 vs average salaries of £36,387. It does make me wonder how sustainable prices are in London.

So given Glasgow’s affordability, combined with Glasgow being the commercial hub of Scotland and the Scottish economy returning to strong growth (GDP +2.6% in 2015 Q1 vs previous year), could mean that now is a good time to invest in the Glasgow property market.

If you want to chat about this or any other property related matter, please feel free to contact me on 07984 619 124 or via email: derek.livingstone@douglasdickson.co.uk.

Glasgow leads the way for rental yields

Poor rental yields is one of the biggest complaints of investors in the London property market at the moment. Well that has been my experience when talking to investors over the last few weeks. Take for example the landlord I met last week who was discussing his poor rental returns. With a yield of under 4%, after paying fees, service charges and mortgage payments he was barely generating any income from his investment. And with talk of interest rates rising soon, he is increasingly concerned that this will diminish further.

However, outside London, rental yields remain attractive. Recently published data by the peer-to-peer lending platform, LendInvest, analysed average rental yield for over 1,200 postcode areas across the UK. According to the data, 3 of the 10 highest rental yielding postcode areas are to be found in Glasgow (G34 11.9%, G21 10.1% and G22 9.2%). Indeed Glasgow provides 11 of the top 25 areas, more than any other city – Birmingham provided 4 areas, Manchester and Liverpool 2 each. At the bottom of the table, 8 of the 10 lowest yielding properties were in London, averaging a rental yield of a measly 2.3%.

Overall, Glasgow came top of the major cities in the UK with average rental yields of 6.9%, above Liverpool (6.2%), Edinburgh (5.9%), Birmingham (5.7%), Leeds (5.7%) and 60% higher than London (4.3%).

Average Rental Yields

So what does this mean for Glasgow buy-to-let investors? Well with the highest yields in the UK, Glasgow Landlords are less exposed to increased interest rates and are able to generate higher incomes (especially compared to what they can earn from a savings account at a bank). And higher yields also make an investment self-funding at a higher loan to value percentage, allowing the investor to put in less upfront equity.  

Savvy investors know that, whilst yield is important it is not the only factor to be considered when looking for a buy-to-let investment in Glasgow. Location, state of the property and common areas and potential for capital growth all need to be taken into account.

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: derek.livingstone@douglasdickson.co.uk.