Letting you into the secrets of 30 years of Scotland's rental market

26/01/2012

By DAVID ALEXANDER. Many things were different back in 1982: a female Prime Minister with a radical political agenda; a war fought 8,000 miles from our shores to recover sovereign British territory from Argentine invaders; a Scottish national football squad actually making it to the finals of the World Cup.

Domestically, Scotland was going through a property slump, that affected even Edinburgh, a city previously thought immune to such occurrences. Not the most auspicious time, one would think, to launch an estate agency and a few months after starting in business, I switched from selling to letting homes. Looking back over those 30 years, the differences between rented property in 1982 and 2012 are perhaps even starker than the changes in society as a whole.

In 1982 there was no such thing as a rental market, certainly not in comparison to what exists today. The stock was incredibly limited – the Marchmont flat which eventually led to my very first letting deal attracted almost 40 inquiries within 24 of being advertised in The Scotsman.

In those days lettings were undoubtedly a landlords’ market. An overwhelming imbalance of demand over supply meant that owners could pick and choose to whom they wished to let. Consequently rents were high – and tenants did not get very much for their money in terms of facilities. The only part of Edinburgh showing any sign of change at that time was Leith where ‘yuppie’ flats aimed at upwardly mobile professional single people were starting to emerge.

A rented flat (if you could secure one) did not come with a television or if it did the model was likely a black and white cast-off. Invariably furniture was second hand and the only white goods found in kitchens were cookers and refrigerators. It wasn’t quite Rising Damp but certainly it did not provide the sort of living conditions that most first-time tenants had left behind at home.

That situation stayed more or less the same until 1998 when the then Chancellor of the Exchequer, Nigel Lawson, introduced the short assured tenancy scheme, which gave landlords the right to reclaim occupancy rights to their properties after a defined period (usually, though not exclusively, six months) without recourse to costly legal wrangling. This altered the rental scenario dramatically by removing the one big barrier inhibiting most ordinary people from investing in rental property – i.e. the time, money and effort needed to reclaim property from a tenant who failed to keep up with the rent or refused to move on when the lease period had expired.

Almost overnight, residential letting changed from a risky and somewhat marginal investment venture into one that combined good returns and relative safety of capital.
Some politicians with their own agenda tried to make out that the short-assured tenancy was a charter for exploitative landlords to throw downtrodden tenants onto the street. In reality, the legislation actually helped the vast majority of tenants (respectable folk who pay rent on time and who treat with respect their landlord’s property) because it brought a whole new generation of landlord-investors into the market, driving up standards with no appreciable rise in rental levels.

Slowly but surely, internal facilities unknown at the start of the 1980s were being provided – new furniture and floor coverings, white goods like washing machines and dish-washers, enhanced home entertainment, beds with superior mattresses that provided a good night’s sleep.

Someone who purchased a flat back then received an average return on capital growth and rental income of approximately 10 per cent per annum and a property bought for £100,000 is probably worth five times that amount today. Nowadays, first-time landlords are not anticipating serious capital growth (at least not in the short- to medium- term) but are attracted by rental yields, which for the present are vastly superior to the returns currently earned from savings.

But on balance it is the tenant who has benefited more. In Edinburgh, a two-bedroom flat (the most popular type of rental property) would have cost approximately £650 a month to rent back in 1982; nowadays the rental will be roughly £900, which does not cover compounded inflation over the past 30 years – and the in-house facilities are vastly superior to what they were back then. (The levels for corresponding property in Glasgow are slightly lower).

To be fair, politicians have also played a positive part: tenants feel more secure thanks to legislation aimed at preventing overcrowding (i.e. HMO certificates) and making gas safety checks mandatory. Unfortunately the legislators have spoiled some undoubtedly good work by introducing other rules which advance political correctness rather than the rights and responsibilities of tenants and landlords.

David Alexander is proprietor of the Edinburgh- and Glasgow-based letting agency, D J Alexander

THE SCOTSMAN, 26 January 2012



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