Scotland’s undersupplied rental market could see property numbers dwindle further as more landlords look to sell their properties, a report has suggested.

Letting agents across the country reported a rise in property owners opting to sell their properties after the end of their current tenancy – with more than 94% noticing an increase.

More than nine in ten agents (93%) saw landlords express a desire to withdraw from the private rental sector due to Scottish Government’s emergency protections for tenants.

However, a union claimed the figures highlighted why “tenants need greater protection against landlords’ greed” and emphasised that renters cannot afford rises. 

The report, conducted by the industry body for estate agents, Propertymark, said a further 83% of agents confirmed an increase in the number of landlords serving notice to sell because of the temporary measure – a rise from 69% in December.

Timothy Douglas, head of policy and campaigns for Propertymark claimed that the figures are a “direct result” of the legislation put in place to support tenants through the cost-of-living crisis.

From the start of the month, an extension on the protections for tenants meant private rent increases were capped at 3% and restrictions remained on evictions.

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Mr Douglas said: “Rent control is causing problems for the sector in Scotland and we know from our member agents that as a direct result of the cost-of-living legislation rents and costs are now being more heavily scrutinised by landlords with many putting up rents between tenancies to protect against any future cost implications.

“The crux of the housing problem is that demand is far outstripping supply, but this legislation is counterproductive for tenants, pushing landlords out of the sector and leaving little choice for those looking for a rented home.”

Under the Scottish Government emergency legislation, landlords can apply for an increase of up to 6% under defined and limited circumstances.

Of all the notices to sell served to tenants, an average of 67 per cent did not meet the exemption criteria – up from 44% in December.

The Propertymark report claimed that the backlog was “concerning” and could lead to costly delays unless additional resources are put in place to deal with the “mountain of notices” in October after the eviction ban is expected to end.

A total of 94% of letting agents said that their landlords have become more inclined to raise rents between tenancies as a result of the Cost of Living (Tenant Protection) Act.

The Herald reported earlier this week that private rents in Scotland had risen to record levels after seeing a 5.1% leap.

 “Whenever tenants get any sort of protections, landlords immediately throw their toys out of the pram and threaten to leave the market,” Living Rent secretary Aditi Jehangir said.  

“We see no evidence for landlords' scaremongering and rather our experience is despite their rhetoric, they are continuing to profit hugely off our need for shelter.

She added that the tenant’s union would welcome a mass buyback programme to increase the supply of council housing.

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Ms Jehangir said: “At the end of the day, bricks and mortar do not vanish. If a landlord sells, the home will be bought by first-time buyers who need a home or by another landlord, in which case the housing supply would remain the same.

“What these figures show more than anything is that landlords will do anything to profit from tenants’ needs, above and beyond what is reasonable and seek to profit from the cost of living crisis that is plaguing us all.

“This just clearly highlights why  tenants need greater protection against landlords’ greed, namely rent controls to properly regulate rent prices.”

The report stated that 93% of letting agents said that the 3% cap was not sufficient to cover increased mortgage payments for landlords.

One testimonial from a letting agent included in the report stated: “Most landlords appreciate the issues around the cost of living; however, one landlord has had an increase in mortgage payments from £151 to £560. So even 6% does not even dent his additional costs.

“Many landlords had not increased rents during 2020-2022 due to Covid and tenants getting back on their feet. Having had no prior notice of legislation in September 2022, landlords feel that their efforts to help tenants have now worked against them as they can’t now even cover their increased costs.

“Landlords are increasing rents on new lets to try and factor in the lack of ability to increase rents with sitting tenants. So, the legislation is actually driving rents up rather than helping the situation.”

A Scottish Government spokesperson said: “We are in the midst of a cost of living crisis. Our emergency legislation has been protecting tenants from significant rent rises and created a temporary pause on the enforcement of most evictions, whilst recognising the effects the cost of living crisis may have on some landlords.

"Since April 1, 2023, private landlords have been able to increase a tenant’s rent mid-tenancy by up to 3%, and up to 6% in specific circumstances.

“We have also reached agreements with social landlords to limit rent rises for this year to give tenants greater confidence about their housing costs and the security of a stable home.

“We are committed to monitoring if the measures remain proportionate and necessary and responding accordingly.”