This month’s edition of The Scotsman’s Property Podcast made in partnership with DJ Alexander sees Kirsty McLuckie and guests look to the future for all aspects of the property market.
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00:00 (upbeat music)
00:02 - Hello, and welcome to this month's edition
00:04 of the Scotsman Property Podcast
00:06 in partnership with letting specialist, DJ Alexander.
00:10 I'm Kirsty McLuckie,
00:11 and as editor of the newspapers home section,
00:14 I not only get to have a look around
00:16 some of the best houses in Scotland,
00:18 but I also write about the market.
00:20 This year has seen a decline in homes changing hands,
00:23 a challenging time for mortgages
00:25 and a downward pressure on prices
00:27 after record rises in the last few years.
00:30 Meanwhile, rents are breaking records of their own
00:34 with meteoric hikes in some areas despite rent caps.
00:38 But what happens next?
00:40 Today's episode, we'll try to look to the future,
00:44 whether that is changes in designs of our homes,
00:46 the way we search for property
00:48 or how important new technologies are going to be.
00:52 Later, we'll talk about the direction of mortgages
00:54 and interest rates
00:55 and how landlords can future-proof their investments.
00:59 But first, we're tackling the subject of innovation
01:01 in new built property.
01:04 Here to give us a taste of tomorrow's home is Ben Di Rollo,
01:08 Director of New Homes for Savills in Edinburgh.
01:11 Welcome, Ben.
01:11 - Thank you, delighted to be invited on.
01:15 - What influences do you see affecting our properties
01:20 in the next few decades?
01:24 - So I think one of the major points
01:26 is the energy efficiency of new developments.
01:29 Scotland are looking to reduce their footprint
01:35 to net zero by 2045
01:38 and a 75% reduction by 2030.
01:42 So a lot of the,
01:44 one of the major influences
01:47 is how do we make properties more energy efficient?
01:50 And that's something that the Scottish government
01:53 are taking pretty seriously.
01:56 They've got the suggestion
01:59 of a Scottish passive house standard by 2025.
02:03 Now that's legislation or a bill coming in,
02:07 which there's quite a lot of detail to be discussed on that.
02:10 But again, it's just to use passive house style technology,
02:14 which is building houses that are really efficient.
02:19 But ultimately, the principle is that
02:21 they leak less energy.
02:24 So I think energy efficiency
02:25 is probably the biggest one that is gonna be tackled.
02:29 And that starts with how these houses are built.
02:33 So it's the materials of what's being used.
02:37 It's the type of heating
02:40 that's gonna be put in the property.
02:42 So at the moment, what we're seeing is a lot of,
02:46 it's either air source heat pumps
02:48 or ground source heat pumps.
02:51 As of today's date, you can still put a gas boiler
02:54 into a property, but that's gonna change as of 2024.
02:58 So like most things,
03:01 the real innovation comes when the demand's there.
03:04 So a lot of heating alternatives to oil and gas
03:08 have, it's not progressed a huge amount
03:12 because the real need has not been there.
03:15 But now there's a massive need.
03:17 There's a huge amount of innovation
03:19 will come in the next couple of years.
03:21 So we are gonna see a huge amount of innovation
03:23 in that space.
03:24 I think there's a real hope
03:27 that hydrogen will be a solution for this,
03:31 obviously because it's the most abundant substance
03:34 that we have.
03:36 The other good thing about that is that
03:40 gas infrastructure and gas heating systems
03:44 could be retrofitted.
03:45 So from a retrofit perspective,
03:49 that's a really strong solution.
03:51 So I think in terms of how houses are built
03:55 and how they'll be heated,
03:57 we'll see a massive change over the next few years.
04:00 We're also gonna see different style of ownership
04:05 or how people live in properties.
04:08 There's now developments that are being made,
04:11 more options for rental.
04:13 I think we're in a,
04:16 we're sort of conditioned into a culture
04:17 where we have to own a property,
04:20 but the younger generation
04:21 don't necessarily want to own a property.
04:24 They're quite happy renting
04:26 and they don't want to be wedded to a single location.
04:30 So that's why we're seeing a big increase
04:33 in built to rent properties,
04:35 but also the sort of co-living developments.
04:38 So the principle of co-living is that broadly
04:41 you pay one rental per month.
04:46 You live in a small type bedsit arrangement,
04:50 but what you have in the building is you have gyms,
04:55 pools, laundry rooms, sort of co-working spaces, et cetera.
04:59 So it's quite a nice way of creating a community.
05:02 And that's the future of city centre living,
05:07 especially in large cities like London and Manchester.
05:11 - Yeah, I was going to ask about the city living.
05:14 In the 20th century, there was a move out of cities
05:17 and all these lovely Edinburgh townhouses became offices.
05:21 And then towards the end of the century,
05:23 there was a move back in,
05:24 and now they're amongst some of the most
05:26 sought after properties
05:28 and most expensive properties in Scotland.
05:30 Can you see that city centres are going to keep attracting
05:34 people who want to live in them?
05:36 - Yeah, I think places like Edinburgh,
05:39 a perfect example of the city centre is,
05:43 is filled with exceptional Victorian and Georgian properties
05:48 and they're very desirable for residential properties
05:53 and now becoming less desirable for office spaces.
05:59 We want people living close to the city centre,
06:01 more houses, less cars,
06:04 the 20 minute neighbourhoods, et cetera.
06:08 So everything being accessible from a 20 minute walk.
06:12 So these are all the principles of why people moving back
06:16 to or moving into the city centre is a good proposal.
06:20 And the same with Glasgow.
06:22 Glasgow has a real need for people to live
06:26 and get people moving into the city centre.
06:30 It's a bit like a donut.
06:31 So a lot of people live on the donut
06:34 and the city centre is where all the businesses
06:37 and shopping is.
06:38 So I think getting people back into
06:42 or living in the city centre is a shift
06:45 that will absolutely benefit the centre
06:49 and also the approach to having less cars on the road.
06:53 - Well, I mean, fewer cars and the pollution control zones,
06:59 but also electric cars.
07:02 And I mean, ultimately driverless cars will mean
07:06 that city centres are just a nicer, safer,
07:09 healthier place to live.
07:11 - Yeah, absolutely.
07:13 I think that's obviously been a,
07:17 pollution has been a big thing.
07:18 If you look at a lot of the old buildings
07:20 in the city centre, you can see they're all black.
07:22 They've been stained over the years
07:25 and there's certainly less cars coming in.
07:27 So Glasgow already started to operate
07:30 their low emission zone.
07:32 Edinburgh will be following next.
07:34 So it will actually be a much better place to live.
07:39 But the new policies for planning is to redevelop
07:41 brownfield sites where possible.
07:43 So that's where there's infrastructure in place.
07:47 So it's a much more efficient way of developing.
07:51 And that brings people into,
07:53 more people living in the city centres, et cetera.
07:56 We're definitely seeing these sites being redeveloped.
08:03 There's not as many of these types of properties left,
08:08 but it's certainly a good idea to start with these,
08:12 'cause when you start with a blank canvas,
08:16 trying to get all the electrics and roads, et cetera,
08:21 can be an expensive and heavy on carbon to facilitate.
08:26 So recycling the brownfield sites
08:28 is a really important route for planners.
08:33 - There's a few good examples in,
08:35 certainly in Edinburgh at the moment
08:36 that I've been having a look about.
08:38 You've encountered those, are you selling those?
08:42 - Yeah, well, we've just released 67 St. Baroness,
08:46 which is at Cannon Mills.
08:49 So that was an old BFI furniture warehouse.
08:52 And that's where we developed into a combination
08:56 of flats and social housing.
08:59 So that's a really good example of a development
09:02 that's peripheral, new town,
09:04 that's been redeveloped, recycled,
09:07 and will create housing,
09:09 and very much part of the 20-minute neighbourhood concept.
09:13 - I was talking to a developer the other day
09:14 who was talking about sustainability
09:16 really starting at the point where they choose the site,
09:21 and that there is an already existing infrastructure
09:25 and community there that they can enhance
09:27 rather than starting brand new
09:30 and trying to link transport links to an out-of-city area.
09:34 - Yeah, absolutely.
09:36 So take Cannon Mills as an example.
09:38 It's got all the infrastructure already on its doorstep,
09:42 the water leaf walkways, the parks, the cafes,
09:46 the restaurants, the schooling, et cetera.
09:48 So redeveloping brownfield sites
09:52 that can patch into that is a great prospect
09:57 from a sustainability point of view.
09:59 - And finally, we're talking about technology.
10:01 I was thinking about the huge changes
10:04 in the way that we look for a home.
10:07 I'm old enough to have started my career
10:09 in an estate agency in Glasgow
10:11 with the old adverts in the window, printed schedules.
10:15 People would come in and have 12 schedules for houses
10:18 and go around to view them,
10:21 and hand-drawn floor plans and things like that.
10:24 And obviously now most of that is done online,
10:26 and you can do little tours, digital tours online of houses.
10:31 But tech innovation, really,
10:35 you almost don't need to go and view a property now.
10:38 - Yeah, I think there's been a huge amount of technology
10:44 that's come into the estate agency sector.
10:48 Estate agency is one of these industries
10:51 where everyone's trying to,
10:54 it's quite a competitive environment.
10:57 So everyone's trying to do something that's-
10:59 - I can imagine.
11:00 - Yeah, that little bit better,
11:02 or get one up on each other, et cetera.
11:05 But ultimately, what's really good
11:07 about the tech that's on offer
11:10 is that you've got good quality floor plans,
11:14 video walkthroughs now for properties that exist.
11:19 And what that prevents people having to make a journey
11:24 of where they can really tell it
11:27 before they have to go in and actually physically view it.
11:30 Take overseas purchasers as an example.
11:33 It's good for them to have these assets and walkthroughs
11:36 and lots of further information
11:38 so they can make a decision.
11:39 So sometimes they're not able to come and see it
11:41 before they buy.
11:44 But one of the most important innovation
11:48 will be around the new homes.
11:50 There's an increasing demand to sell developments
11:53 and properties off plan.
11:55 So that's obviously before they're built.
11:58 It's a difficult decision at the best of time
12:00 to buy a property.
12:02 And so by using state-of-the-art technology,
12:05 we're using computer game technology
12:10 on low-degree node as an example,
12:11 down at 67 St. Bernard's,
12:13 where you're able to walk through the apartments
12:17 and it gives you as true a representation
12:19 as you could possibly have in a virtual world
12:22 to what the property looks like,
12:24 what the light could be like.
12:26 We've actually got the views taken by a drone.
12:28 So the photographic views from the balconies
12:32 are the views that you'll see from the development.
12:35 So all these tools will help people make a decision
12:39 or be easier, especially when you're buying off plan,
12:44 which the property might not be ready for six, nine months
12:47 from when you pay your deposits.
12:50 So there's a lot of technology that is required
12:54 in order to, just to give people as true representation
12:57 as they possibly can before they have to buy.
13:00 - I was thinking about developers
13:02 and the long lead-in between buying a site,
13:06 going for planning permission, starting to build,
13:08 and then finally releasing the properties for sale.
13:11 And obviously they cannot predict
13:14 what prices are going to do,
13:15 but they have to do their sums somehow.
13:17 How do they do that?
13:18 And how do they cope with sort of a downturn
13:21 either in the number of sales,
13:23 the activity in the market or prices?
13:26 - Yeah, so I think if you get your product right,
13:29 so you do your research and analysis
13:31 at the start of the process.
13:33 So if you have a site,
13:35 you try to make as best assumptions as you possibly can.
13:38 So who will be the likely buyer demographic?
13:41 So very seldom is it a single buyer demographic.
13:46 Then you look at the location.
13:48 And if you build the properties to suit that location
13:52 and to suit the end users as a demographic,
13:57 and then you'll be in a good position
14:00 for when you come to sell the properties.
14:02 We've got a fantastic research team.
14:05 So we always forecast what the values will look like,
14:10 today's dates, what they're potentially gonna look like
14:12 in a year, two year, three year from today.
14:17 And it's about making calculated,
14:21 as calculated as you can guesses
14:22 of where the market's going to be.
14:24 But I think if you get the product right,
14:26 the specification right,
14:27 and you'll always,
14:31 the developers are always been a good position
14:32 when they come to launch the properties for sale.
14:35 - And so I suppose that leads me to the next question,
14:39 which is what are your predictions for house prices
14:44 over the next year, three years, five years?
14:48 - It's a loaded question.
14:51 I think in terms of, look,
14:54 the interest rates were too low.
14:59 It was a period of time where it wasn't sustainable
15:02 to keep the interest rates at that level.
15:05 So what we're going through at the moment
15:06 is a readjustment period.
15:07 So people that could afford properties at 600,000,
15:12 it's a readjustment.
15:13 It might only be 500,000 or 450,000
15:16 that they can afford now.
15:17 So we're just getting into a position
15:22 where it will be the new norm.
15:24 And I think once the market's settled,
15:26 that's when we'll start to see growth.
15:28 So we've probably got a little bit of choppy waters
15:33 in terms of just the unknown of interest rates, et cetera.
15:36 And so I think what we'll see is for the next,
15:40 I don't know, six, nine, 12 months,
15:42 prices slowly on the increase in places like Edinburgh,
15:45 because we're lucky to be in Edinburgh
15:49 from an investment perspective
15:51 because values always hold up.
15:54 Scotland-wide, I think we'll see slow increase
15:58 in values next year, but with 2025,
16:01 is when we'll start to see the market move forward again.
16:06 - Ben, thanks so much for talking to us today.
16:09 And we'll look for some of these innovations
16:13 in the near future.
16:15 - No, thank you.
16:15 And thanks for inviting me on.
16:17 - I'd now like to welcome my next guest
16:19 who will be hopefully shining some light
16:21 on the future of mortgages.
16:24 Dominic Taddy is the Chief Executive Officer
16:27 of Mortgage Advice Bureau Network Partner.
16:30 Welcome, Dominic.
16:32 - Hello.
16:33 - Hello.
16:33 First of all, could you just give us a little recap
16:37 on what has been happening to mortgages
16:39 over the last year or so?
16:40 It's been something of a turbulent time.
16:42 - Yes, it certainly has, Kirsty.
16:46 And thanks very much, first of all, for having me on today.
16:49 Yeah, it's been a very interesting 12 months or so,
16:53 and possibly even a little bit further back than that.
16:55 We've gone through quite a lot
16:58 over the last two or three years, haven't we?
16:59 But yeah, the last 12 months in particular
17:02 have been very interesting.
17:04 As we all know, the Monetary Policy Committee meet
17:08 and have been doing their level best
17:10 to try and kind of get inflation under control.
17:13 And we do probably expect base rates
17:16 to continue to rise marginally.
17:18 But we obviously want to avoid too much volatility
17:23 in terms of when they start to drop again.
17:26 But I do think the pressures that these rate increases
17:28 are having on so many people is staggering
17:31 and arguably not being talked about enough in the press.
17:34 Specific to mortgage rates,
17:38 although the base rate has been climbing steadily
17:43 and now is the highest it's been
17:46 since the financial crash of 2008,
17:48 the lenders are acting slightly differently
17:50 this time around.
17:51 I remember that time very well.
17:52 It was actually a period of growth for our business,
17:55 which we were kind of bucking the trend at the time.
17:58 But at that time, many of the lenders
18:00 were rolling down the shutters
18:02 and were very wary of lending.
18:04 Whereas the lenders are,
18:06 especially over the last month or so,
18:07 have actually been reducing the rates,
18:10 offering good comparative deals,
18:13 which is great for us and the consumer.
18:15 So the appetite is still there to lend.
18:18 - There's still a degree of competition there
18:23 between lenders then.
18:25 - Well, exactly right.
18:26 Yeah, these guys have still got their targets to meet
18:28 and they still need to retain some sort of market share.
18:31 So the appetite is very much still there.
18:34 And actually this week alone,
18:36 we've seen some lenders reduce the rates further.
18:39 So yeah, it's an interesting time.
18:41 It's very unusual.
18:43 It's the first time I've seen it like this in 20 years.
18:45 - And do you think, I mean, in terms of,
18:48 you feel that there's a sort of a general downward trend.
18:52 I have been noticing,
18:53 I mean, it's tiny incremental steps, isn't it?
18:56 But I mean, what are the predictions maybe
18:58 over the next year?
18:59 Is anyone sort of taking a punt on that trend continuing?
19:03 - I think it's very difficult.
19:06 The analysts, even the big lenders,
19:08 will struggle to give you anything definitive for sure.
19:12 But my own opinion is that as the base rate stabilizes,
19:15 which it will,
19:16 and then potentially start to come down again,
19:19 which a lot of the analysts are predicting,
19:21 then I can only imagine that the lenders
19:24 will at least maintain the similar sort of level
19:27 that we've been used to over the last month or two
19:29 and continue to drop them back down again.
19:32 But I think, as I touched on earlier,
19:33 we need to be very careful of reducing rates too quickly.
19:36 And I think the days of the 1.8 lending rates
19:41 are a long way away for now,
19:44 but I do think they will continue to drop in 2024, yeah.
19:49 - It just seems like from a consumer's point of view,
19:53 sometimes that it's all just a little bit of a gamble.
19:56 And I'm just wondering if you're seeing people holding off,
20:01 or are they still going for those fixed rates?
20:03 - It's a really good question.
20:06 I'll try and answer this quickly,
20:08 but having built the business,
20:10 we've got quite a number of advisors here,
20:11 and a lot of the younger guys and girls who are advisors
20:15 have only ever been working with fixed rates
20:19 over the last number of years.
20:21 So yeah, we are starting to see people come in
20:23 and opt for trackers now for sure.
20:26 And I think more than ever,
20:29 customers need a good broker, a good advisor,
20:32 who's gonna give them solid advice.
20:34 - So that it absolutely individually
20:36 matches their circumstances.
20:38 - Yeah, and of course, there is an element
20:41 of the fixed rates being quite a bit higher,
20:42 and quite a lot of talk of interest rates coming down.
20:45 So the appetite to take a little bit more of a risk
20:49 is definitely there,
20:50 whereas in the last number of years,
20:52 the fixed rates have been so low
20:54 that there was little point in giving advice
20:57 other than a fixed rate mortgage.
20:59 - Yeah, looking to the more distant future,
21:02 I just wonder about this sort of slightly turbulent year
21:05 or so that we've had.
21:07 And I wonder if you can see permanent changes
21:10 coming in the mortgage market.
21:11 I was thinking of things that I know
21:13 that the average mortgage apparently
21:16 now lasts more than 25 years
21:18 because people are taking longer mortgages.
21:22 And also these sort of longer fixes,
21:25 you know, the five-year fixes,
21:27 the seven-year, 10-year or whatever.
21:29 And I know in other countries,
21:30 they offer fixes for the whole length of the loan.
21:33 Could you see that becoming popular here?
21:36 - I'm not sure about fixed rates for the whole term.
21:41 I think there's a lot of, you know,
21:43 there's a lot of history in terms of how our lending
21:48 has gone on and, you know, let's be honest,
21:51 things do change, but I certainly think
21:53 we'll see more longer term fixes.
21:55 There's 10-year fixes available just now.
21:59 And the answer to your first question
22:02 in terms of the 25 years,
22:03 I mean, there's a number of reasons for this.
22:05 You know, quite often from an affordability
22:08 modeling perspective, a mortgage is affordable
22:11 and therefore can be obtained.
22:13 If, for instance, we're stretching the term to 30 years
22:16 or possibly even 35 or 40 years,
22:18 it then allows the affordability to work.
22:21 And of course, the monthly payments
22:23 are considerably less as well.
22:25 We would always advise a client to do it
22:27 over the least amount of time as possible
22:28 because, you know, of course you pay less interest.
22:31 And, you know, whilst a client may take a mortgage
22:34 over a longer period of time,
22:36 most mortgages will allow an overpayment,
22:38 which in effect then can reduce that mortgage back down.
22:42 And similarly, you know, just because a client
22:44 takes out a 35-year mortgage,
22:46 when they come to remortgaging two, three, five years time,
22:49 they can then reduce that term now.
22:51 But yeah, I mean, when I first bought my house
22:54 and when I first started this business 20-odd years ago,
22:57 25-year mortgage was the norm,
23:00 but it's not like that anymore, for sure.
23:03 - Yeah, and as you say,
23:03 people can sort of adjust their payments
23:06 and most people will remortgage
23:08 during the life of home ownership or a mortgage anyway.
23:12 So yeah, I suppose that if you're going through
23:14 a lean time, these longer rate mortgages
23:16 can just allow you to keep your home
23:19 until you're back on your feet again.
23:21 - Yeah, absolutely.
23:23 I mean, again, if I think back, when I was advising,
23:26 I've not advised for, you know, a little while now,
23:29 I run the business and we've got a number of advisors here,
23:33 but at the time, the choice around product,
23:37 whether it's offset or, you know,
23:39 or current account mortgages,
23:41 there seemed to be certainly more clients
23:44 with an appetite to try different types of mortgages.
23:47 Whereas, as I say, for the last number of years,
23:49 it's been pretty straightforward fixed rate mortgages,
23:51 you know, so I think we'll start to see
23:53 a little bit variation in the product type coming out,
23:55 which will ultimately be driven by the lenders
23:58 and their pricing modeling.
24:00 - Having been in the business for 20 years,
24:01 you've probably seen the last financial crisis,
24:04 weathering this credit crunch,
24:07 do you think 100% mortgages will ever come back?
24:11 - Yeah, well, I mean, there's one available right now,
24:13 one of our lenders will offer a 100% mortgage,
24:16 but there's pretty strict criteria at the back end of that,
24:19 where, you know, they have to qualify.
24:21 And, you know, as I say,
24:23 there's quite strict criteria around that.
24:25 So they are there at the moment.
24:27 I don't see any reason why there won't be more of that.
24:32 I think we have to be very careful
24:33 around loan to value bandings.
24:35 You know, that's one of the reasons
24:36 that we got ourself into those difficulties in 2007, 2008.
24:41 So, but it's, you know, it will be market led.
24:46 And I think if there's a need
24:48 for higher loan to value products,
24:49 then, you know, then there will be there.
24:52 You know, we still have 95% mortgages.
24:54 And of course, banking mom and dad,
24:56 they play a big part in our deposit these days.
25:01 And, you know, gift to deposits.
25:03 We see around 50% of our mortgage applications
25:06 that will have some form of gift of deposit,
25:09 which is huge compared to what it used to be.
25:11 I think the best guidance I can give to anybody
25:14 is really to seek out a good broker.
25:18 I think there's more need than ever to do that.
25:21 And, you know, a good broker
25:25 will be worth their weight in gold.
25:26 And there's lots of different ways
25:28 that we can help clients obtain a mortgage.
25:31 And any good broker will do that.
25:32 And we've just touched on that there just now
25:34 with various ways of raising deposits
25:37 and extending terms and making more affordable
25:39 and that sort of thing.
25:40 So that would be my best advice to your readers and listeners.
25:44 - To really try and get a bespoke deal.
25:46 - Yeah, absolutely, Kirsty, yeah, for sure.
25:50 - Thanks so much, Dominic.
25:51 We shall wait with bated breath
25:52 for the next interest rates announcements
25:55 from the Bank of England.
25:57 But thanks for talking to us today.
25:59 - Thanks, Kirsty, nice to talk.
26:00 - I'd now like to welcome my next guest, Ben Alexander,
26:04 Head of New Business at Letting Specialist, DJ Alexander.
26:07 Hello, Ben.
26:08 - Hi there.
26:09 - Hi, we've been discussing the future in this edition.
26:13 And it is incredibly difficult to make predictions
26:15 about the property market.
26:17 But I just wanted to ask you first
26:19 about the record rent rises
26:21 that have happened in Scotland recently,
26:22 despite the legislation brought in by Holyrood
26:26 to prevent that happening.
26:27 And to ask if your industry saw it coming.
26:30 - The Cost of Living Tenant Protection Act
26:32 has certainly only accelerated this imbalance
26:34 between the supply and demand.
26:36 We voiced opinions at the time of this being brought in,
26:38 suggesting this would only be a further nail in the coffin
26:41 for many landlords, which has proven to be the case
26:44 and ultimately true.
26:45 And the very act that's been brought in to protect tenants
26:48 has had the opposite effect for new tenancies
26:51 and tenants looking for new accommodation.
26:53 Currently, the rental market,
26:55 there's the biggest disparity
26:56 between the supply and demand in the 15 years.
26:58 I've certainly been working within the industry.
27:00 Landlords have had to make difficult decisions
27:02 to exit the market due to in some instances,
27:05 the properties is no longer being a viable investment.
27:08 Previously, we've always seen a bit of a relative churn
27:11 of landlords in the marketplace
27:13 where old landlords are replaced
27:14 with new buy to let investors.
27:16 But unfortunately, the latter really hasn't been the case.
27:20 Due to all the reasons just mentioned,
27:22 there's less appetite for buy to let investors,
27:24 as well as new barriers of entry.
27:26 So that exit of current landlords,
27:28 the lack of influx of new investors
27:31 has been over a real sustained period of time now
27:33 and has caused and been the cause
27:36 for new rental prices increasing
27:37 at rates that we've never seen before.
27:41 Latest figures show double digit average growth
27:43 for a third consecutive quarter.
27:45 Unfortunately, this trend is not one
27:47 that we see kind of changing anytime soon.
27:50 - So it's existing tenancies
27:52 that have the restrictions on rent rises.
27:54 So as a response, are you seeing tenants
27:58 who have got a flat or a house already
28:01 staying put rather than moving?
28:03 - Without a doubt, existing tenancies are lasting longer
28:06 than they ever have done before.
28:07 Our average length of tenancy is increasing
28:10 and we're certainly seeing that in the market
28:12 that tenants are staying longer
28:14 because naturally the property that they're renting,
28:17 the rental price has fallen below the current market rate.
28:21 So yes, without a doubt, that is a trend
28:23 that we're seeing continue to grow.
28:25 - Which I suppose does have its disadvantages
28:27 because for people who really want to move
28:31 who the property no longer suits them,
28:33 it's sort of that they're a little bit stuck,
28:35 albeit with a better rent.
28:37 - Of course, listen, I see lots of different tenants
28:40 in different situations that are really reluctant
28:43 to give up those tenancies because they now feel
28:45 that they've got a good deal for the level of accommodation
28:48 yet, even though it may not exactly suit their requirements
28:53 until they have to move for geographical reasons
28:56 or not enough bedrooms, whatever might be the case,
28:59 they're trying to make do where they can
29:01 until the time comes that they have to move.
29:04 - Now, moving on to new landlords
29:08 or those wanting to build or expand a portfolio,
29:12 I'm assuming future success is all about
29:14 buying the right property in the first place.
29:17 And I've always wondered,
29:18 is there sort of one perfect property type
29:20 that you would recommend that say cheap to buy,
29:25 low maintenance, commands a healthy rent
29:28 with a likelihood of a good capital growth
29:30 and a pool of keen tenants,
29:32 or is everyone searching for that kind of unicorn property?
29:36 - Yeah, I mean, that's from what you've described there,
29:38 that's key to a lot of investors
29:41 and what they're looking for, that low maintenance,
29:43 healthy rents, good capital growth, good pool of tenants,
29:46 you know, that is the unicorn that people are looking for,
29:50 but ultimately that comes in different shapes and sizes.
29:53 One of the benefits to the aspect
29:56 of the supply and demand disparity at the moment
29:58 is potential yields,
29:59 which can now be achieved for new landlords
30:01 coming to the market
30:02 or for landlords that are already in the marketplace
30:04 for new tenancies.
30:06 And we're hoping that will drive some new investment
30:09 into the long-term rented sector.
30:13 - So I'm just going to try a few binary questions
30:18 for you then to just try and see
30:19 if we can pinpoint your advice
30:22 on sourcing the right property.
30:26 So a little quick fire round for you,
30:28 traditional versus new build.
30:31 - Yeah, difficult for me to be too quick fire.
30:35 There's pros and cons to both.
30:36 You know, we're seeing more of a demand
30:37 for new build properties from buy to let investors
30:40 compared to traditional
30:41 because of hopefully more certainty
30:43 when it comes to long-term potential costs
30:45 and maintenance of their asset.
30:48 There's more consideration also being given to properties
30:51 which have a better energy efficiency.
30:53 And generally speaking,
30:54 they will be newer built properties,
30:56 both from a user point of view
30:58 and landlords wanting their day-to-day costs
31:01 for a tenant to be less,
31:02 making their property more attractive,
31:04 but also because of upcoming proposed legislative changes
31:09 regarding minimum EPC requirements
31:12 for new and existing tenancies.
31:14 Some of the cons to new build
31:16 may be that traditionally,
31:17 traditional properties have always been considered
31:20 to gain more capital appreciation.
31:23 This is in part due to traditional properties
31:25 more likely being in well-established neighborhoods
31:29 with historical significance, for instance,
31:31 that may have a proven track record
31:33 of steady property value appreciation.
31:37 So difficult to give one or to the other,
31:39 there's certainly opportunities in both.
31:41 - Okay, what about the old rivalry,
31:45 Glasgow versus Edinburgh?
31:47 - There's certainly potential for good investments
31:49 in both cities.
31:51 There's good rental demand in both cities,
31:52 first and foremost.
31:54 And it really comes down to more the type of property,
31:59 the property's location within those individual cities,
32:02 which will drive whether it becomes ultimately
32:05 a good investment or not over the longer term,
32:07 rather than just Edinburgh versus Glasgow.
32:10 - And finally, what about flat versus house?
32:14 - We certainly see more demand in terms of volume
32:18 for flatted dwellings.
32:20 It's always important to think about the type of tenant
32:23 a property will attract
32:25 when considering a buy-to-let property.
32:27 For us, with the volume being in one,
32:30 two bedroom central units,
32:32 year round there will be demand for that type of property.
32:35 So no matter what time of year
32:37 that that property might become available for rent,
32:39 there will be a good demand to source a new tenant
32:41 and hopefully a low void period.
32:43 The flip side in kind of family, larger family homes,
32:47 yes, there's a good demand for larger family homes.
32:49 However, it's slightly more of a seasonal market,
32:52 the summer being the time of year
32:53 that families want to move.
32:55 Therefore, it can be detrimental
32:57 if the property becomes available
32:58 in the depths of the winter,
33:00 rather than a year round attraction
33:02 to one and two bedroom flats.
33:05 - And finally, something that does seem to be happening
33:07 in the very near future, despite legal challenges,
33:11 a huge change in the short-term letting market
33:14 is predicted to lead to many landlords
33:16 of the Airbnb type properties
33:19 getting out of the industry altogether.
33:22 Now, some will put their flats over to long-term tenants,
33:26 presumably, others may choose to sell.
33:28 But do you see that as an opportunity
33:30 for people considering a buy to let?
33:33 - Yeah, we do.
33:35 We have already seen a number of inquiries
33:37 and landlords switch over or considering switching over
33:40 from short-term lets to longer-term rental market
33:43 because of these upcoming changes.
33:44 However, these naturally won't flood
33:48 the long-term rental market.
33:50 And there's a number of landlords
33:51 who will sell and exit, as you suggest.
33:54 But there's also a number of short-term lettings,
33:56 landlords who currently go down the short-term letting route
33:59 because they themselves use their property
34:01 when visiting family or use the property
34:04 for a month, a year, for instance,
34:05 for other personal reasons.
34:07 They don't have the option of going over
34:08 to the long-term rental market,
34:10 as they may still have the requirement
34:12 to use the property themselves at certain times of the year.
34:16 So whilst we will see a few landlords move across
34:18 from short-term lettings to the long-term rental market,
34:22 we will also see some of them exit the market,
34:24 which may be opportunities for new buy to let investors
34:28 and/or we will see properties just being taken off
34:31 the short-term rental market
34:33 and used for the landlord's own purposes.
34:35 - Which also begs the question,
34:38 where are we all going to holiday next year?
34:40 But you don't have to answer that.
34:42 - Listen, it certainly does.
34:45 You know, that's, yeah, it's a funny one in general.
34:49 One thing that I've seen when meeting a number of landlords
34:51 in this boat who are considering the switch over,
34:54 one thing that's been really interesting
34:56 for me to see on the ground
34:58 is the kind of care that's taken from these landlords
35:02 to providing a service to visitors in Edinburgh.
35:05 The majority of individuals that I've met
35:07 genuinely care about the level of accommodation
35:09 they're offering visitors.
35:11 They generally care and are conscious about the neighbours
35:14 of the properties that they're offering
35:16 and have close relationships with the neighbours
35:18 to try and ensure that anyone that they have
35:21 coming to the property is of a suitable fit
35:24 and is not the hen-stag type party
35:28 that the rhetoric that you obviously hear quite a lot.
35:31 They're not offering sofas and beds
35:33 and trying to cram as many visitors in as possible.
35:35 They're trying to look after their asset
35:38 as well as try and look after the neighbours
35:40 that are surrounding them as well.
35:42 So it's been really interesting to see,
35:43 for me, who doesn't get too much of an insight
35:45 into the short-term rental market,
35:47 the quality of some of these landlords
35:50 and the frustration of some of them
35:51 that it's a service that they enjoy offering
35:54 to visitors in Edinburgh
35:55 and they enjoy having a positive impact
35:59 both in that regard as well as to their neighbours
36:02 and the quiet enjoyment of their neighbours,
36:04 yet they're obviously not able to operate any further.
36:09 - It's going to be a massive shake-up
36:11 and as I say, it's not just of the property market,
36:15 the rental market, the sales market,
36:17 but the way we spend time in our own city
36:20 and the way that we invite overseas visitors in.
36:24 Thanks very much, Ben.
36:25 That brings us to the end of this edition
36:27 of the Scotsman Property Podcast
36:29 brought to you in partnership with DJ Alexander.
36:33 I'd like to thank my guests,
36:34 Ben DiRolo, Dominic Taddy, and Ben Alexander.
36:38 If you've enjoyed this edition,
36:40 look out for next month's
36:41 when we will be finding out the best ways
36:43 to add value to your home.
36:45 [Music]
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