Scottish Government plans to introduce rent controls could “sound the death knell” for future investment in Aberdeen, one of the country’s leading letting agents has warned.
Nicola Sturgeon announced the proposal to cap rents in “pressure areas” as she outlined the SNP’s legislative programme for the year earlier this week.
The Scottish Government says the Private Tenancies Bill aims to increase the security of tenure for tenants while providing appropriate safeguards for landlords, lenders and investors.
However, there are fears the move could further damage the north-east economy, which has already been affected by the falling oil price.
Aberdein Considine, which acts for 2,000 landlords across Scotland, said sections of the Aberdeen market would “almost certainly” face rent caps.
As a result, experts at the firm believe landlords will now look to invest outwith the north-east to protect their yields.
Adrian Sangster, the firm’s leasing director, said: “Whilst we support efforts to improve standards within the private rented sector, any legislation should be proportionate, protecting the interests of both landlords and tenants.
“It is my opinion that an introduction of rent controls will deter investment in the sector and curtail much needed housing.
“I’m concerned this bill could sound the death knell for future investment.”
He also suggested the Scottish Government saw landlords as an “easy target” and appeared to be penalising them for the “failures of successive administrations for not investing in the provision of social sector housing”.
Richard Rennie, partner with law firm Burness Paull, echoed the concerns.
“The stage in the market for these private rented schemes is quite early days. The danger is investors just think this is too much of a risk and it kills it dead before it has a chance to take off,” he warned.
A Scottish Government spokeswoman said the Bill aimed to modernise the private-rented sector to improve management and regulation, in turn providing good quality homes and making the market attractive to investors.
She added: “Subject to an application from a local authority, ministers will have the ability to introduce local rent controls for sitting tenants in areas under rent pressure.
“These would be areas where there are significant increases in rents and the local authority is concerned about the consequent impact on tenants and the housing system more broadly.
“Consultation with landlords will be built into this process along with the ability of ministers to vary any limit set.”