A pre-Christmas present for the housing market

The ending of rent controls and return of market forces have stabilised average prices, writes David J Alexander.

The latest statistics on rents in the private sector in Scotland reveal a remarkable turnaround in the market over the last year. Since the ending of rent controls and the return of market forces average prices have stabilised and for some sizes of properties have actually fallen.

The most recent quarterly statistics published by the Scottish Government show that average rents for two-bedroom properties (the most common size of property) rose by £28 per month to reach £921 per month, a 3.1 per cent increase in the 12 months to September 2025, which was the same as the annual rate of inflation for the year. One-bedroom properties rose by 4.0 per cent, which was a £28 increase per month to reach £738; three-bedroom properties were up 1.6 per cent, which was an £18 monthly increase, reaching £1,154; and four-bedroom properties were down 1.5 per cent, dropping £26 to reach £1,767. Lothian has the highest two-bedroom rent at £1,356 while Dumfries and Galloway had the lowest at £569.

The long-term trend is even more extraordinary. Between 2010 and 2025 just four areas of Scotland had rent at or above the cumulative inflation rate of 54.7 per cent and these were Lothian, Greater Glasgow, Dundee and Angus, and Forth Valley. The remaining 14 areas all saw rents fall in real terms over the 15-year period. Average rents across Scotland as a whole rose 67 per cent over the 15 years, which is only 12 per cent above the inflation rate equivalent, to an increase of less than 1 per cent per year. These figures highlight just how effective the market has been in meeting demand in the private rented sector this last year. As more homes have become available average rents have stabilised and reflect an annual rate in line with the historic trend rather than the blip caused by September 2022’s introduction of rent controls.

During that period supply dried up, resulting in greater demand and higher rents. The 12-month period from September 2022 to September 2023 saw average rents in all sizes of properties experience double digit increases at a time when inflation was 9 per cent.

This shows that the market has produced fair rent increases for tenants over the long term and that the distorting factor of rent controls was the wrong approach to the private rented sector.

Yet the Housing Scotland Act has a proposal to reintroduce rent controls if local council analysis of rent levels indicates disproportionate increases. While there are obvious hotspots in Edinburgh and Glasgow where demand is higher than elsewhere, rent controls are a blunt instrument to maintain rent levels below market demand. A better solution is to encourage landlords and property investors to maintain and increase supply to ensure rents rise at a steady and manageable rate.

An opportunity exists next month to attract more landlords and investors to Scotland. On 13 January the Scottish budget will be published, with the option not to replicate the Chancellors’ 2 per cent increase in tax on rental income. Making Scotland a more tax-efficient destination for property investment would send a clear signal to the market that the private rented sector is welcome and encouraged in Scotland and would go some way to resolving the current housing emergency.