Scottish Housing Market Review: Q3 2021

Summary of the latest Scottish housing market data.

Rental Prices

Private Housing Rental Prices

Private housing rental prices increased by 1.6% annually in Scotland to August 2021. This continues a period of relative stability in nominal private rental price growth. Since June 2017, rental price growth has ranged between 0% and 2%, with an average of 0.7%. In real terms (adjusting for inflation, using CPI), the annual change in August 2021 was -1.6%. Chart 3.1 shows that the annual change in real private housing rental prices rose towards positive territory as CPI inflation fell due to the impact of Covid-19, but it has returned to negative territory with the recent increase in CPI inflation, which reached 3.2% in August 2021. The heightened level of CPI inflation can be partly explained by a base effect, with discounted restaurant and café prices due to the Eat Out to Help Out Scheme in August 2020 and reductions in VAT for the same sector.

Chart 3.1 Annual Change in Private Housing Rental Prices (Monthly): Scotland
shows the annual change in private housing rental prices in Scotland on a monthly basis in both nominal (not accounting for inflation) and in real terms (removing the effect of inflation).  In August 2021, rental prices increased in nominal terms by 1.6% annually but when we remove the effects of inflation, this falls to a 1.6% decrease.

Source: ONS Rental Price Index, Consumer Price Inflation (CPI)

The moderate growth in average rents across Scotland masks significant regional variation. Scottish Government statistics show that from 2010 to 2020 (years to end September), the annualised average rate of change in mean rent for a 2 bedroom property was over double that of inflation (CPI) (1.4%) in both Greater Glasgow (3.5%) and Lothian (3.8%) Broad Rental Market Areas ("BRMA"). Meanwhile, the annualised average rate of change was equal to or below that of inflation (CPI) in 10/18 BRMAs.

Chart 3.2 Annualised Average Rate of Change in Mean Rent (2 Bedroom Property), YTE Sept-10 to YTE Sept-20, by BRMA
outlines the annualised average rate of change in mean rent for a 2 bedroom property. This covers the period from September 2010 to September 2020.

Source: SG/ONS CPI

* Note: Scottish Government statistics are based almost entirely on advertised rents at point of new let, and thus will tend to be higher than the ONS data which makes an allowance for rent changes in existing lets. In addition, chart 3.2 looks solely at 2 bedroom properties, whilst 3.1 looks at the entire market



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