RENTAL PROPERTY MARKET: The perfect property storm

LANDLORDS in Scotland have never had it so good as falling house prices and mortgage rationing by lenders fuels a boom in demand for rental property. A generation of potential first time buyers locked out of the market by mortgage product withdrawal and increased arrangement fees, interest rates and deposit requirements are opting to rent instead.
Meanwhile second and third time buyers who have sold their property are choosing to rent in the hope of picking up a bigger bargain later in the year.
David Gibb, financial controller at Edinburgh property manager DJ Alexander says mortgage rationing by banks and falling house prices helped fuel a record month in July.
"If you're a homeowner and have just sold your property, there's no point buying something else, even though there are bargains to be had. You're still better off putting your money in a high interest account and seeing where the market goes in the next six months."
Demand was so strong - particularly for one and two bed flats - that properties were being re-let before the previous tenants had vacated at rent increases of up to 25 per cent. If there was a threat to this boom, the likeliest candidate was oversupply. "It would maybe be a case of too many properties coming onto the market if, for example, building companies were to flood it," Gibb says.
"It really depends on where you want to let. I think safe Edinburgh stock such as the New Town, Stockbridge, Marchmont and Bruntsfield will stand the test of time, but the newer ones might see oversupply."

Excerpt from article in Insider magazine, September 2008