Citylets Rental Report Q3 2007 Summary

No hurricanes but plenty of unusual events these past few months, the full effects of which have probably yet to be felt. Floods, foot and mouth disease and financial turmoil didn’t help spirits already dampened by the generally wet and grey summer. Fears of a slowdown in the economy have curtailed the widely expected interest rate rise. However, with oil at a record high, the prices of metals and soft commodities (eg wheat) all soaring and food prices already rising don’t bank on a rate cut before 2008.

The credit crunch came home to roost with the run on Northern Rock doing little for consumer confidence and with credit criteria toughening and the cost of borrowing increasing, house prices growth is slowing. We expect to see an increase in tenant demand over the next few quarters if uncertainty continues and potential buyers ‘wait and see.’

The third quarter was a busy one in the Scottish rental market with, as per previous years, volumes peaking in August. 2 bed flats in Edinburgh saw a healthy increase in rents though Glasgow rental values remain largely unchanged. 1 & 2 bed properties in Aberdeen are again Top Trumps, renting very quickly and recording large rental increases and we take a look back to Q3 2005, the quarter when rents started to rise.

Rents for 1 & 2 flats in Aberdeen have increased almost as fast as house prices suggestive of a shortage and a need for a few boulevards d’appartements. Increases in the energy sector (and related) employment would seem to be the main demand driver and with Aberdeen being fairly small in size it probably doesn’t take too much of a swing to alter the equilibrium. Value wise three beds properties seem to be cheapest on a shared basis.

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