The outlook for Scotland's BTL market in 2025 and beyond

    Paul Huxter - Head of Intermediary Sales and Distribution

Scotland’s Buy-to-Let landscape has been the subject of much debate among landlords in recent months, with ongoing concerns about the immediate future of the market. Some of these concerns are warranted – largely due to the short-term unattractiveness of new purchases. However, for those looking to make long-term property investments the opportunity may be clear as day.

What is happening in the Scottish BTL market?

In December 2024, the Additional Dwelling Supplement (ADS), a tax levied on properties other than the owner’s main residence, rose to 8%. As recently as January 2019, it was 3%.

The Cost of Living (Tenant Protection) (Scotland) Act in 2022 compounded these concerns with temporary rent caps of 3%. Fortunately for landlords, these caps expired at the end of March 2025, although new rental controls have been proposed by the SNP. Landlords have increased rents between tenancies to stay ahead of rising costs.

Rental demand has been growing alongside rental yields. Average rents for 1-bedroom properties increased 9.6% YoY, while rent for 3-bed properties has increased by over 10%.

Although rental demand has been growing, private rental stock has decreased. Around 15% of properties on the landlord registration database are estimated to have been lost over the past two years.

Reasons for optimism in Scotland’s BTL market

Despite recent ups and downs in the market – there are reasons for optimism among professional landlords:

1. The expiration of rent caps creates a window of opportunity for landlords to raise rents to market-related levels for the first time since 2022.
2. Demand for rental property remains high – with the average time to let (TTL) at 23 days. Average TTL on 1-bedroom properties rarely exceeds 20 days across postcodes.
3. Volatile short-term prospects for landlords have caused some to exit the private rental sector, leading to reduced competition. Astute landlords can provide rental properties where others have left a void.
4. Rental yields remain high, averaging over 5% in popular postcodes across major cities. These yields help landlords mitigate ADS costs in around two years.
5. ADS increases have disincentivised many professional landlords from expanding their portfolio. However, specialist lenders such as West One have stepped into the Scottish market to offer more bespoke products that help offset the short-term challenges of high acquisition costs.
6. Between January 2020 and June 2024, house prices grew by over 25% – an average annual compound growth rate of 5%+. While not guaranteeing future performance, it does provide positive long-term prospects should BTL property prices keep rising consistently.
7. While yet-undefined regulatory developments mean short-term uncertainty, landlord-led lobbying groups are standing their ground and actively challenging proposed government reforms in the rental space, which may lead to better policies that work for both tenants and landlords.