Edinburgh leads field – but it needs more rental homes

The current steady growth in Scotland’s private rented sector is what investors want to see, writes ​David J Alexander.

An annual increase of 1.7 per cent in average rents in the private rented sector (PRS) may not sound spectacular but it is positive and a sign of stability in the market. The latest data from the Office for National Statistics (ONS) shows that in the year to July 2026 average rents in Scotland increased by £17 to reach £1,016 which, although this was the smallest percentage increase of any part of the UK, is from a higher starting price than most parts of the country and indicates steady growth overall.

Nobody would argue that this was an exceptional year, but property investment should always be seen as a long-term plan. Stability and steadiness in the PRS are much better than a rollercoaster ride of large increases one year and decline the next. Investors want security and that is only delivered through steady growth.

Although the other countries in the UK had higher percentage increases – with Wales up 4.5 per cent (£843); England increased by 3.8 per cent (£1,451); and Northern Ireland rose 2.3 per cent (£875) – many areas of the Scottish market are performing extremely well.

Across the country there are enormous price differences with the Lothians – and this is primarily driven by Edinburgh – achieving the highest monthly rent at £1,415, followed by Greater Glasgow on £1,264; East Dunbartonshire on £1,169; West Lothian £972; and West Dunbartonshire at £942.

The areas with the lowest average rents are the Highlands and Islands on £733; Perth and Kinross at £729; Borders on £707; Ayrshire at £646; and Dumfries and Galloway on £554.

The first set of figures are encouraging and show continued price growth across large parts of Scotland. The PRS in the Central Belt continues to perform well as this is the most popular area providing the most employment opportunities and greater lifestyle options, so rents remain healthy as demand continues to be strong.

There is also little sign of any downturn in the PRS in Edinburgh with the capital’s population forecast to rise substantially in the coming decade. Edinburgh’s working age population rose by 33,000 between 2014 and 2024 which was a 10 per cent increase while Scotland as a whole only rose by 1.7 per cent over the same period and it is anticipated this level of growth will continue.

With Edinburgh also producing higher GDP than London last year for the first time, you have a city whose high-earning working population is expanding, which will attract greater investment and further growth.

The result is that Scotland’s capital will require substantially more homes in the PRS in the coming decade if there are to be enough properties to meet the needs of the expanding population. Equally the areas surrounding Edinburgh and across the Central Belt will need to grow to meet demand.

I remain optimistic that the PRS will continue to be a formidable and important part of the housing market in the decades to come. There will be large variations in which parts of the country will expand but the Central Belt looks certain to be expanding for some time to come. It is essential that appropriate support is given to the private rented sector to ensure it is able to meet the demands of this well-paid, well-educated, and motivated workforce. Housing will be as important in attracting a high-quality workforce as employment and lifestyle opportunities and it should be recognised for this.