The Fine Balance between Supply and Demand

The private rental sector in Scotland is a fluid, dynamic market and the price a rental property achieves can be influenced by many differing factors. For example, a property’s location, condition or perhaps how it compares in size, decoration to similar properties in the local area are all instrumental. Essentially once one has allowed for all of these characteristics, you are left with the simple overall forces of supply and demand which ultimately dictate a market price.

Citylets, given its leading position in the Scottish rental market, are in a perfect position to analyse both market forces and show how provision of supply and appetite for demand varies across the country. Our interactive map below, is based on the latest data for Q4 2012 and shows the proportion of rental transactions by property type (i.e. houses or flats) for each local authority area, this represents the supply side of the equation. Perhaps more noteworthy is that for the first time we have analysed the demand side in more detail namely the ‘where and what’ that potential tenants are searching for on Citylets. With more than 3 million visitors a year Citylets have a very rich source of information to interrogate. Comparing this demand indicator with actual supply data reveals where there are significant differences, and it is in these areas that prices will likely be most affected as a result.

As you can see, the urban area of Glasgow (91.2%) is dominated by the supply of flats with only one in ten properties on the market being houses. In this populous city, it is no surprise that the demand for flats closely matches this supply (94.2%) which has been reflected in only modest price increase over 2012 of 2.2%. However when analysing data for Clackmannanshire which saw a 4.1% year on year increase for 2 bed flats, the largest year on year increase since Q1 2011, you could surmise that this trend has been driven by the imbalance between property supply (61.3%) and relative demand (70.0%) for flats. This apparent under supply has probably enabled local landlords of flats to take advantage of these market forces and increase current rental prices slightly more than would have been the case otherwise.

Obviously this potential imbalance between particular search traffic demand and actual rental property supply is not the only cause for price movements but it can be a useful indicator especially when analysing a local market.  In our example, the data has been segmented by property type (i.e. house or flat) and local authority. However given the granularity of Citylets data, we can further analyse supply and demand by number of bedrooms, postcodes or even furnished/unfurnished properties.

For more information on the data on this story, please contact me here.

Lewis Manley

Lewis is Research Director at Citylets ensuring that its data and research on the Scottish PRS can be utilised by all. Interested in all things residential, Scottish and property during the week, and then sports, family and the outdoors at weekends. Follow Lewis on Twitter @lewismanley or connect on Google Plus

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