drives up cost of rent­ing – worse on way

The Scotsman - - Farming -

teria re­main tight. At the same time more would-be buy­ers are choos­ing to rent for the longer term un­til len­ders re­duce their de­posit de­mands and eco­nomic un­cer­tainty eases.

How­ever the RICS re­port sug­gested that more rental prop­er­ties are com­ing on to the mar­ket in Scot­land, with 7 per cent more sur­vey­ors re­port­ing a rise in land­lord in­struc­tions than re­port­ing a fall.

Sarah Speirs, deputy di­rec­tor at RICS Scot­land, said the mar­ginal growth in the sup­ply of rental prop­erty in the three months to the end of June mir­rored the in­creased de­mand for let­tings. But while ex­ist­ing land- lords look­ing to ex­pand their port­fo­lios are still strug­gling to ob­tain fi­nance, Speirs said there could be a fresh in­crease in the sup­ply of rental prop­er­ties over the com­ing months.

“Lack of sup­ply means rents have started to in­crease”

Diarmid Macken­zie Smith

“The lat­est RICS Hous­ing Mar­ket Sur­vey shows a lack of de­mand from buy­ers, but in­creas­ing num­bers of prop­er­ties for sale. If this trend con­tin­ues we may see the re­turn of the ac­ci­den­tal land­lord, and some mod­er­a­tion to the re­cent rental re­cov­ery,” she said.

Diarmid Macken­zie Smith, of Ret­tie & Co in Ed­in­burgh, said de­mand for rental ac­com­mo­da­tion re­mained strong in the cap­i­tal. “Lack of sup­ply, due to at­tempts to sell, means that rents have started to in­crease.

If sales do not com­plete the re­verse will hap­pen as prop­er­ties come back to the let­ting mar­ket.”

Higher rental costs in Scot­land were in tune with the pic­ture across most of the UK. More than a quar­ter of UK sur­vey­ors said the cost of rent­ing a home had in­creased dur­ing the sec­ond quar­ter, com­pared with those who re­ported a fall, while a third more ex­pected rents to con­tinue ris­ing than ex­pected them to drop.

How­ever David Salus­bury, chair­man of the Na­tional Land­lords As­so­ci­a­tion, said that while in­creased de­mand was pos­i­tive news for land­lords, around one in five were ex­pe­ri­enc­ing prob­lems with rent ar­rears.

“Added to the forth­com­ing cuts to Lo­cal Hous­ing Al­lowance and the pos­si­bil­ity of in­creased in­ter­est rates, it is clear any in­crease in rents will be quickly off­set by these ad­di­tional fac­tors that have to be taken into ac­count.”

the con­text of sav­ings and in­vest­ments, in­fla­tion is as­sessed in terms of the neg­a­tive ef­fect it has on re­turns. Es­sen­tially, in­fla­tion will erode the pur­chas­ing power of the funds in­vested, but the ef­fect of in­fla­tion, un­like tax­a­tion and charges, is of­ten not ap­pre­ci­ated when choos­ing the most suit­able in­vest­ment or in­vest­ment strat­egy.

Cash sav­ings are im­pos­si­ble to pro­tect against in­fla­tion be­cause the in­ter­est rates avail­able sel­dom match the rate of in­fla­tion. While the cash amount will ap­pre­ci­ate in line with the in­ter­est rate, the un­der­ly­ing real value will be eroded.

In­vest­ment port­fo­lios can in­cor­po­rate ve­hi­cles that negate the ef­fect of in­fla­tion. Tra­di­tion­ally, NS&I in­dex-linked sav­ings cer­tifi­cates of­fered in­vestors an in­vest­ment re­turn that kept pace with in­fla­tion, but this op­tion is no longer avail­able af­ter be­ing with­drawn last month.

An­other in­vest­ment of­fer­ing pro­tec­tion against in­fla­tion is in­dex-linked gilts. Com­pared with con­ven­tional govern­ment gilts or cor­po­rate bonds, these tend to have a lower yield and their value moves in line with in­vestors’ ex­pec­ta­tion of in­fla­tion rate changes.

There­fore, while they fac­tor in in­fla­tion, they can be volatile and do not of­fer any

Chris­tian Poziemski is a wealth man­ager within the pri­vate client and fi­nan­cial ser­vices di­vi­sion of HBJ Gate­ley Ware­ing

If you have a ques­tion you need an­swered, write to Jeff Salway, The Scots­man, 108 Holy­rood Road, Ed­in­burgh EH8 8AS or e-mail: jsal­way@ scots­ This above is for gen­eral pur­poses only and is not tai­lored for in­di­vid­ual use. It does not con­sti­tute le­gal, fi­nan­cial or in­vest­ment ad­vice on any par­tic­u­lar mat­ter and must not be treated as a sub­sti­tute for spe­cific ad­vice. No ac­tion should be taken in re­liance of the in­for­ma­tion given. The Scots­man Pub­li­ca­tions Ltd and HBJ Gate­ley Ware­ing ac­cept no li­a­bil­ity on the ba­sis of this ar­ti­cle.

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