by Simon Bain© The Herald
Originally published: 05.01.2008

This year will present investment opportunities for bold buy-to-let landlords in the "pit of fear" that is Scotland's property market, according to Edinburgh-based letting specialist Braemore.

Rising interest rates, fluctuating stock markets, a slowdown in house sales, and concerns over bank mortgage lending are shaking confidence in the property market.

But William Frame, chairman of Braemore, which manages 800 properties, said: "Whenever there is uncertainty in the market there is an opportunity to buy well. People start to panic and often look to accept a first offer, or are prepared to be negotiated down."

He went on: "By being canny like this, people can pick themselves up an excellent investment opportunity. There is also every chance that, if the price is right, they can achieve a very good yield, something very close to most investors' hearts at the moment."

Property group Knight Frank predicts prices will rise by 5-per cent in Scotland this year, and HBOS says there could be limited price growth, in contrast with declines in many UK regions.

HBOS says sound market fundamentals, including high levels of employment and a shortage in the number of properties available for sale, will continue to support house prices.

Buy-to-let prices and rental yields will be affected by the availability of cheap mortgage deals - Nationwide says the credit crunch will make it more difficult for new investors to enter the sector, underpinning returns.

The Royal Institution of Chartered Surveyors (RICS) reported last month that while demand continued to grow strongly for houses, an oversupply of new-build properties was depressing the rent increases being achieved for flats.

But the RICS says the outlook for rent growth is strongest in London, Scotland and the east of England, and adds: "Many landlords will still take solace from uncertainty in the economy and enjoy the gains from rising rents."

A Bradford and Bingley report last month found that rental yields remain steady across the UK at 5.72-per cent, marginally up on the previous survey, while the secondhighest yields were commanded in Scotland, averaging 6.01-per cent.

Braemore reports a "clear imbalance" in the rental market, with ever-growing demand for rental accommodation not being matched by new landlords coming into the market.

Frame said: "I would say we are edging towards undersupply in the rental market in Edinburgh, particularly for good one/two-bed city centre flats.

"We recently experienced a situation where we had our lowest number of properties available to let in our 15-year history -it means we desperately need more landlords.

"But for those landlords willing to go into the pit of fear of Scotland's rental market, there are rewards to be had."

Demand is being fuelled by the high property prices, which keep people in rented accommodation, and the ever-growing volumes of young professionals relocating to Edinburgh. Rental levels had risen in recent months, helping to improve yields, while 2007 had brought typical capital gains of 10-per cent-12-per cent.

Frame said: "We've always said buy-to-let should be a long-term game, and while those who got in early are really reaping success, I firmly believe those who have the bravery to go in now and buy well will be looking back in a number of years' time and wondering why they were so worried."