Scotland’s private rental sector (PRS) is undergoing a “reset” due to ongoing uncertainty over policy direction, according to recent research.
A study by legal firm Gilson Gray, based on data from Citylets, highlights that rental prices have stalled in most of Scotland’s major cities. However, despite this slowdown, the country still recorded an overall annual rent increase of 6.2%. This rise is largely due to the lingering impact of significant rent hikes seen in 2022 and 2023, which have now spread to other areas.
In Edinburgh, the rental market showed a split trend. While rents for one- and two-bedroom properties rose by 1.9% and 2.2%, respectively, three- and four-bedroom properties experienced a decline of 2.4%. Overall, rents across all property types in the capital saw a minor dip of 0.1%.
Glasgow displayed similar mixed results, with an overall decline of 1.9%. However, some property types bucked the trend, with one-bedroom properties seeing a slight increase of 0.3% and four-bedroom properties rising by 0.4%.
Dundee recorded the sharpest decline among Scotland’s four largest cities, with rental prices dropping by 4.4% overall. This was largely driven by a steep 10.2% annual decrease in three-bedroom property rents. However, one-bedroom properties in Dundee saw a notable 6.2% increase over 12 months—the strongest growth rate among all property types tracked in the research.
Aberdeen stood out from the rest of Scotland’s rental market, recording a 1.5% increase in rents after facing several difficult years. The only exception was four-bedroom properties, which saw a significant annual decline of 9.6%.
According to legal firm Gilson Gray, major shifts in the market are being driven by various factors, particularly the rent cap and eviction legislation outlined in the Housing (Scotland) Bill. This bill is currently progressing through the Scottish Parliament. The Scottish Government recently announced plans to remove existing rent controls by the end of March 2025, with new regulations expected to take effect in 2027.
Marcus Di Rollo, lettings director at Gilson Gray, described the current market as a “patchwork of growth and decline” across Scotland. He explained that several converging factors are causing a recalibration of rental prices.
Larger properties, in particular, are experiencing price drops. This shift may be linked to changing post-pandemic trends. During the pandemic, demand for spacious homes with gardens surged, and tenants were willing to pay a premium for these features. However, with rising interest rates and ongoing economic challenges, that trend has reversed. Many tenants are now downsizing or relocating to more affordable properties.
At the same time, a growing number of young people are choosing to stay with family or move back home rather than face high rental costs. For many, this is the only realistic way to save for a deposit and take their first step onto the property ladder.
On the supply side, ongoing policy uncertainty is having a significant impact. The Housing (Scotland) Bill and short-term lettings legislation are creating uncertainty among landlords. While the bill could lead to more landlords leaving the market, the short-term lettings rules may result in additional properties becoming available. Until there is clarity on both, it remains difficult to predict the long-term outcome. However, the removal of rent controls should offer some stability as the Housing (Scotland) Bill progresses through Parliament.
With all these factors in play, the rental market is undergoing a reset as prices adjust to new conditions. Despite this, demand remains strong, while the supply of private rental properties continues to decline. The high barriers to entry for new landlords, combined with a shortage of new-build developments, suggest that this imbalance is unlikely to change in the near future. Until the various policy and economic factors affecting Scotland’s rental sector are resolved, uncertainty is set to continue.
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