City flat rentals soar as cash for mortgages grows scarce

EDINBURGH has seen a huge rise in the number of flats being let, led by "reluctant landlords" who find themselves unable to sell their property.

Citylets, the website which represents most city property agents, has reported a 47 per cent increase in the number of two-bedroom flats compared to the last quarter.

Rent levels for one-bedroom flats have risen by 5.9 per cent compared to July to September 2007, the report found.

Property experts say that many young professionals and couples are looking to rent rather than buy a home because of the credit crunch. And many owners have been "forced" into renting their homes because they cannot find a buyer.

Thomas Ashdown, Citylets managing director, said: "There's no doubt we are seeing a significant change in the make-up of the property market. The collapse in confidence in the property buying market has seen an enormous swathe of potential home owners divert into rentals.

"In Edinburgh this is most apparent with the astonishing demand for two-bedroom flats, where we have seen lets soar by almost 50 per cent compared to the second quarter of the year.

"This clearly points to a trend that young people and professionals are not buying property because of difficulties securing a mortgage or a lack of confidence.

"The slowdown in the property market has seen a new wave of 'reluctant landlords' – home owners or small-scale property developers who are unable or unwilling to sell in the current markets – look to rent out their homes."

The report is based on 30,000 lettings from 200 property agents across Scotland, including 87 in Edinburgh. The average rent in the city is now 752, compared to 749 three months ago.

The most expensive area to rent a one-bedroom flat is the city centre, where tenants pay an average of 590 a month. The most expensive two-bedroom flats are in EH3, which includes Canonmills, Fountainbridge, Inverleith and Tollcross, with average rents of 839.

Mr Ashdown added: "This really is an astonishing period for the Scottish rental market – we have never seen anything like it.

"But it is important to realise that things can change – if demand peaks and supply continues to climb there will be pressure for rents to flatten, as has happened in countries such as Ireland."

Diarmid MacKenzie Smith, the director of lettings and management at Rettie & Co, said there were signs supply was catching up demand. He said: "Earlier in the summer demand was outstripping supply but we are starting to see a change in that. Our stock level is twice what it was this time last year and rental increases are slowing."