Rental market is stabilising, but demand still outstrips supply

There are signs that the private rented sector is beginning to stabilise after a period of unprecedented demand over the last few years. The latest UK Market Rental report by Zoopla shows that average rents in Scotland rose by 3.1 per cent in the year to January 2025 at a time when average incomes were increasing by 4.8 per cent.

Within the wider increases in Scotland there were regional variations with Edinburgh rents rising by 3.0 per cent; Aberdeen up by 1.8 per cent; and Glasgow increasing by 1.3 per cent. Across the UK Belfast had the greatest increase rising by 9.2 per cent while Nottingham actually saw rents fall by 1.2 per cent over the year. Interestingly, London had the third lowest rent increase of just 1.1 per cent but from a much higher price average of £2,166 per month based on the average for one-four bedroom properties.

The Zoopla report produces interesting reasons for this change and states that: “rental demand has cooled across all regions and countries of the UK over the last year. This is largely as a result of lower levels of immigration for work and study, as well as greater first-time buyer demand, most of whom originate from the rental market.”

A further downward pressure on rents has been an increase in supply with Scotland increasing by 29 per cent over the last year, which is the highest figure of any part of the UK. Meanwhile, in the West Midlands supply has actually fallen by ten per cent over the last year.

The argument provided for rent controls is that rents are increasing beyond affordability but clearly these figures demonstrate the opposite. With average rents across Scotland increasing by 3.1 per cent at a time when incomes have risen by 4.8 per cent it is clear that affordability is improving.

The increase in the volume of properties available is a further indication that allowing the market to stabilise and rebalance is the way to produce rents that are affordable and accessible. Historically in Scotland, the market has produced relatively stable annual percentage increases in the PRS and these figures indicating that things are returning to their long-term trend.

However, while these figures show that rental inflation has stabilised it is clear that demand still outstrips supply, with 12 people applying per property to rent. This is 42 per cent lower than the period between 2022 and 2024 but still higher than before the pandemic. Therefore, while this data does indicate that the situation is improving for tenants there is some way to go before the market returns to its pre-2022 position.

There still remains a need to increase supply, to encourage more investment in the private rented sector, and to ensure that there are sufficient homes for everyone who needs them. It is only by working in tandem with the private sector, social housing, and housebuilders that we can begin to address the current housing emergency.

I would, therefore, urge the Scottish Housing Minister to remove the current plans in the Scotland Housing Bill to introduce rent controls as it is clear they have been the cause for recent rapidly rising rents. It is only by allowing market forces to return to delivering normal service that we will have a rental market with greater stability, ensuring sustainable growth in the future.