According to the latest Real Estate 360 survey conducted by RSM UK, landlords are showing a growing interest in Scotland as a prime destination for residential property investment. The survey findings reveal that 14% of landlords now anticipate Scotland to attract significant investment in the next three years. This marks a noteworthy increase from the previous year’s figure of 7%. Interestingly, Scotland is projected to follow closely behind London, which remains the top choice for investment (48%), and the South East (25%).
This shift in perception underscores a changing landscape in property investment preferences, with Scotland gaining traction among landlords. The increased appeal of Scotland as an investment destination may be attributed to various factors, including potential market growth, favourable rental yields, and evolving economic dynamics. As landlords explore new opportunities outside traditional hotspots like London and the South East, Scotland emerges as a promising alternative, offering potential for long-term returns and diversification of investment portfolios.
Scotland has also made significant strides in the commercial property sector, emerging as one of the top five regions for investment, according to recent findings. Approximately 12% of respondents anticipate Scotland to be a prime attraction for commercial investors, reflecting a slight increase from the previous year’s figures by 3%.
Moreover, insights from the survey indicate a positive outlook for various segments within the property market. A significant 43% of respondents anticipate growth in the residential and private rental sector over the next 12 months, reflecting growing confidence in Scotland’s property landscape. Following closely behind, 24% of respondents foresee growth in student housing, indicating a diverse investment landscape. Additionally, industrial and logistics sectors are expected to see growth, with 20% of respondents expressing optimism in these areas.
Despite the optimism surrounding the property market, challenges persist for investors. While 82% agree on the importance of strong environmental credentials for real estate businesses to secure financing, access to funding remains a significant barrier, with 35% of landlords citing it as the second highest obstacle to investment. This highlights the need for proactive measures to address financing hurdles and foster sustainable growth in the property sector.
Moreover, only 12% of respondents anticipate an improvement in access to funding within the next 12 months. Various barriers continue to impede investment prospects, including concerns about economic recession (53%), business rates (25%), global shocks (25%), and political instability (23%).
Claire Monaghan, partner and head of real estate and construction at RSM UK in Scotland, underscores the opportunity for investors to contribute to increasing housing supply in Scotland. The current economic climate has led to prolonged tenancies in the rental market, driven by limited support for first-time buyers and substantial interest costs. This, combined with a shortage of available properties, has fueled rental growth and heightened appeal for investors. As a result, the residential sector has witnessed consecutive double-digit growth over a two-year period.
“Planning departments and local authorities have a crucial role in promoting forward-thinking and maintaining an adequate housing pipeline. While purpose-built student accommodation often receives criticism, its provision frees up traditional housing stock for broader housing needs.”
“With the Scottish government abandoning its target to reduce greenhouse gas emissions by 75% by 2030 and introducing the new Housing Bill, including proposals for long-term rental controls, the sector faces uncertainty. The resignation of the First Minister and upcoming elections add to the political instability. What’s necessary is certainty to ensure sustainability targets and housing legislation changes don’t hinder investment.”
