December 27, 2025
It’s that time of year, when the world falls in love🎶… Ah, not where we meant to go! It’s the time of year where we reach out to our fellow property professionals and ask them a simple question; “what’s going to happen in 2026?”
It’s been an interesting few years in the market, but we seem to have achieved some stability once more; interest rates are slowly declining, prices are rising but not in an eye-watering manner and demand for rented accommodation remains strong.
The Housing (Scotland) Bill 2025 has been passed, you can read our thoughts about the likely effects it will have on the PRS in our previous blog.
Predictions for the PRS in 2026
So, what do our fellow-professionals expect from 2026? Let’s find out! Our first prediction comes from Nick Ponty (Arc Property in Glasgow).
Nick Ponty, Arc Property
“In the Glasgow market, rental demand remains strong, but conditions have started to stabilise after the rapid growth in rent prices we saw in previous years.
Instead of having 20+ tenants competing for each property after the first viewing, we’re now having to work a bit harder as agents!
The market has become more price-sensitive in certain areas, and in some cases, we’ve had to make modest rent reductions or properties have taken longer to secure good tenants.
That said, demand still comfortably outweighs supply for quality, well-presented homes. Annual rent increases have become standard practice across much of our portfolio, typically aligned with inflation.
This shift followed government intervention, and most landlords are now factoring in additional risk given the potential for future rent controls under the latest Housing Bill.
Personally, I don’t think there’s too much cause for concern.
I doubt most local authorities will actively implement rent caps unless market conditions deteriorate significantly — and even then, the proposed limits (6% or CPI +1%) are manageable.
Despite the political noise, I still see buy-to-let property as a solid long-term investment.
If you’re buying in the right areas, there are strong yields available, and property values in Scotland continue to show steady growth even in a challenging economic climate.”
Steven Clark, This Is Property
“The private rental sector in Scotland is on track for another strong year in 2026. The main reason is simple: we still don’t have enough homes.
Years of slow building, planning delays and several councils declaring housing emergencies mean demand is much higher than supply. Scotland remains short of good, affordable accommodation; demand remains strong across most areas.
A big shift is also continuing within the landlord landscape. Many small or “accidental” landlords who own just one or two properties in their personal name are choosing to sell.
They’ve been squeezed by stricter regulations, higher compliance costs, EPC requirements, rent caps and general political uncertainty. All of this has encouraged them to exit the market.
At the same time, a more professional group of investors is stepping in. These investors are treating property as a business, buying through limited companies, using more advanced finance strategies and building proper, scalable portfolios.
This shift is raising standards across the rental sector and making it more stable for both tenants and long-term investors.
Lower interest rates are expected in 2026 this may also encourage more first-time buyers to get on the property ladder. Many renters who have been priced out by high mortgage rates will see buying as more achievable again.
While this might reduce demand slightly at the lower end of the rental market, it’s unlikely to make a big dent overall, because deposits, affordability tests and the lack of new housing keep many people in the rental sector for longer.
The Additional Dwelling Supplement (ADS) sitting at 8% is also shaping investor behaviour. With such a high tax added to the purchase of additional properties, buying higher-value homes for long-term letting becomes far less appealing.
This pushes investors to focus on more affordable properties, flats and renovation projects, or to look for off-market deals where they can add value.
Others may consider short-term lets or serviced accommodation to boost income, though these strategies require more management and must comply with increasingly strict licensing rules.
Some investors are also turning to commercial buildings that can be converted into residential use, as ADS does not apply to commercial purchases.
All of these factors combined are making the Scottish rental market far more professional and business-led.
Investors are now thinking more strategically, using company structures from day one, relying on data to guide decisions, partnering with private investors, buying in bulk and focusing on renovation-led value creation.
Even institutional players are expanding into the build-to-rent space, which shows how much the sector is evolving.
Scotland’s rental market is no longer a place for casual landlords who treat it as a part-time hobby. It is becoming a full business ecosystem, with higher standards, better-quality housing and more long-term thinking from those who choose to invest.”
Alistair Ewing, The Lending Channel
“As a leading property finance broker based in Scotland, I’m well placed to comment on market conditions specifically relating to borrowing money to finance Buy-to-let (BTL) property transactions.
We will complete somewhere around £50m worth of BTL lending in 2025, which shows decent growth compared to what we did over the past couple of years and will be a record year for us.
This is against a backdrop of higher mortgage rates and ever increasing regulation – not least the recent Housing (Scotland) Bill which introduces (potential) rent controls for Private Residential Tenancies (PRTs).
Many commentators report that BTL is dead in Scotland, but of course with a steady demand from people looking for homes within the (PRS), this is simply not the case.
However, there is no doubt that being a landlord in 2025 comes with many challenges and many smaller landlords with 1 or 2 properties are exiting the market.
In our experience however we are seeing significant growth from professional landlords looking to seriously grow their portfolios. So what lies ahead for 2026 and beyond?
Whilst interest rates haven’t come down as much or as quickly as landlords hoped for, they have stabilised. In my opinion, BTL rates will gradually reduce in 2026, but don’t expect them to return to pre-2022 levels.
The demand for housing in the PRS will keep the market strong, but landlords need to be looking at how best to maximise yield whilst keeping acquisition costs as low as possible.
Multiple Dwelling Relief is still available in Scotland for landlords able to buy 6 or more properties in one transaction, which means no 8% Additional Dwelling Supplement to pay.
Buying below market value and diversifying into other areas like HMO, Holiday Lets or Commercial Investment are becoming more popular for some landlords looking to grow their portfolios.”
Màiri McAllan, Cabinet Secretary for Housing
We invited the Cabinet Secretary to comment, she declined to do so. We could make a fuss about this but wearing our reasonable hat, any politician is wary of making predictions!
Additionally, any pronouncement by a housing minister could be interpreted as market interference, so her festive silence is perhaps understandable.
John Blackwood, Scottish Association of Landlords
“2025 marked a turning point for Scotland’s housing sector – one that will shape the future of landlords and tenants alike.
It was the year that the single largest piece of legislation relevant to us, the Housing (Scotland) Act, received Royal Assent and became law.
There were difficult and emotive debates around energy efficiency and rent controls, and we also saw the housing portfolio elevated to Cabinet Secretary level and the appointment of Mairi McAllan, one of the SNP’s high flyers, to that important role.
Personally, I would like to thank the Cabinet Secretary for the positive and constructive attitude that she has shown so far and I hope to see more of that as we go forward.
As the Scottish Association of Landlords (SAL), we have worked hard to play a useful role in the housing debate at this time of housing crisis, and to be the voice of the PRS in Scotland when those crucial issues were being hashed out.
Despite some hard conversations, our engagement with ministers, opposition politicians, and other key stakeholders has been collegiate, productive, and constructive.
SAL has also been doing more to advocate for landlords and letting agents in public. We launched our SAL podcast Landlord Voice, we revamped our Landlord Focus magazine, and we have been working with the press to get our point across.
We’re proud of the work we have done this year, and we look forward with anticipation to 2026; even more so because SAL will be celebrating our 25th anniversary!.
2026 is also set to be a big year for the PRS. With the legislative process concluded, there are the subsequent regulations to be considered. This will take serious, experienced engagement and SAL will be part of that.
We’ll do our best to ensure that they are developed in a way that benefits landlords, letting agents, and our tenant customers. There will also be ongoing debate around energy efficiency and rent controls that will need our input as the voice of landlords to be complete, and SAL will add their experience to achieve the best outcome for all.
The biggest problem that we must address is the rate at which landlords are leaving the sector. From our research, we know that many, for reasons ranging from retiring to the hostile political environment, are considering an exit.
It is our goal to encourage them to remain, and invest further if possible. We will also seek ways to encourage new investors into the Scottish PRS
It is clear to us that only by bringing more properties and landlords into the sector can we secure a fairer, more competitive, and more robust PRS for the future.
SAL will also prioritise a change in the narrative around private renting in Scotland. For too long, the conversation has been framed as ‘landlords versus tenants,’ with the rights and prosperity of one group pitted against the other.
This cannot continue. For the PRS to work, we must think about the landlord/tenant relationship as that of a business delivering a service to its customers and act accordingly.
Nobody can deny that the PRS, and housing in Scotland more widely, has its challenges to overcome. This is true of all sectors of the Scottish economy. So, as we enjoy the festive period and prepare to step into 2026, we do so confident and determined, and, most of all, optimistic about what the year ahead has in store.”
Iain Henderson, Handelsbanken
We decided to approach Iain Henderson from Handelsbanken to ask him about some of the most important questions in terms of finance for 2026. Here’s what he had to say:
Why has the Bank of England cut Interest rates despite rising inflation?
“This was a question addressed by Handelsbanken’s UK Economist recently. When inflation peaked in mid-2022 at 11.1% the Bank of England sought to put the brakes on the UK economy by increasing interest rates from 0.1% to 5.25% by mid-2023.
This medicine brought down inflation to around the target range of 2% in mid-2024, as energy prices dropped and the interest rate rises reduced demand in the UK economy.
Over the past year we have seen the Bank of England cut rates as inflation has risen again to near 4%, so why is this the case?
Firstly, the increase in UK inflation is in part driven by one-off price increases in regulated markets (e.g. water bills), and it assumes these increases will wash through by next year.
Secondly, the impact of changes to interest rates do not occur immediately – the obvious example is the mortgage market as most UK mortgage holders are on fixed rates.
Thirdly, most economists think that the current Bank of England base rate at 4% is above the “neutral rate” of interest. The neutral rate is effectively where interest rates should be to achieve 2% inflation in the medium term when the economy is steady.
This means that despite interest rates falling from 5.25% to 4% over the past year or so, the Bank of England’s policy continues to bear down on UK economic growth.”
What’s next for UK interest rates and inflation?
“Currently, financial markets think there will be two further UK interest rate cuts within the next year, with (at the time of writing) the first cut likely to be agreed at their meeting in December 2025, with an expectation that another will follow at some point in 2026.
Under these expectations, the Bank of England’s latest view is for the UK eventually to move back to 2% inflation. This view could of course change.
However, estimating the “neutral rate of interest” is not an exact science. Inflation risks lurk around the corner: the Bank of England now thinks inflation will be higher than previously expected, and the public is now more attentive to inflation compared to pre-pandemic times.
Both factors increase the risk that interest rates may not continue to fall over the next 12 months. But, for now at least, the assumption remains that interest rates will fall a little further despite high levels of inflation.
Our key takeaways: UK interest rates have fallen from 5.25% to 4% despite inflation doubling. The Bank of England is responding to one-off price shocks and delayed policy effects. Interest rates may fall further, but inflation risks remain.”
Timothy Douglas, Head of Policy and Campaigns, Propertymark
“Although the Housing (Scotland) Act 2025 has now received Royal Assent, there is still much to be done to make the legislation effective.
A year ago, significant questions remained about the form rent control would take, and we still await the final verdict on the exemptions regime for the traditional PRS.
We do know that buy to rent and mid-market rent properties will be exempt from any future rent control areas.
2026 will also see the Scottish Government consult on the arrangements for pets in rental properties, and what changes tenants will be permitted to make to their rental properties.
Letting agents will need to make their views and concerns clear (to the government) to make sure this legislation works for landlords and tenants.
Barring some fresh global emergency, we can be confident that May 2026 will see elections to the Scottish Parliament. Before then, on 13 January 2026, the Scottish Government will present their budget.
Last year saw a rise in the Additional Dwelling Supplement under Land and Buildings Transaction Tax (LBTT) from six to eight per cent, and there are fears the Scottish Government will come back for more.
The recently appointed Cabinet Secretary for Housing, Màiri McAllan, seems to appreciate that burdening the private rental sector has consequences, confirming that the Government would not present the Heat in Buildings Bill before the election.
It remains to be seen if the Scottish National Party will be pragmatic on tax or give in to the temptation to further tax landlords ahead of an election.
We do know that from 1 May 2026, rental discrimination protections against families with children or people who receive benefits as contained in the Renters’ Rights Act passed in Westminster will extend, and take effect in Scotland.
This means that letting agents can only assess tenant suitability on the basis of affordability checks. We also expect that new EPC regulations for Scotland will come into force as planned on 31 October 2026.”
Advice from the property pros
Okay… Some very well considered analysis and predictions this year. It has been a significant year for the PRS in Scotland, with the Housing (Scotland) Bill looming over us for much of it.
While the overall economic outlook in Scotland and the wider UK hasn’t been overly encouraging, what we have seen is a return of stability, sadly lacking for some time.
This has been seen in reducing interest rates and more predictable inflation rates, in the sense that swings haven’t been extreme.
Despite the best efforts of the media, governments both north and south of the border have also been more stable with fewer public-relations disasters and scandals than has been the case in previous years.
However, with elections to the Scottish Parliament scheduled for next year, we may see some changes of emphasis should there be a significant change in parliament.
Legislative changes have altered the relationship between tenants and landlords, something which SAL wants to emphasise going forward, so while not all changes might be welcome, there is a common direction of travel.
Barring any acts of taxation-based foolishness in January 2026 by the Scottish Government, the overall impression is that 2025 has been a year of hard-won stability and retrenchement.
Consequently 2026 should present further opportunities within the PRS. Homes are still very much in demand. While smaller landlords may be considering their future, professional investors are becoming more involved in the sector.
In summary…
Assuming (always dangerous) that there are no sudden shocks to the system next year, we, and our contributors, expect to see 2026 as a year of increasing investment within the PRS.
The sector is undergoing many changes, however it is the way of legislation that having presented several new laws affecting the PRS, governments tend to turn their attention to other matters.
So our prediction for 2026 is that the market will spend time adapting to a new legislative topology, and while doing so, will strengthen and expand. The challenges we all seek to address are still there.
Our sincerest thanks to all of our contributors for their thoughts and for taking the time to express them so cogently.
Chris and I are as ever available should you wish to consider investing in this brave new world, just get in touch and let’s talk.
We hope you all had a great Christmas and are looking forward to a few more days of rest and relaxation before we all find ourselves pitched into a whole new year!
Written by Chris Wood, MD & Co-founder of Portolio, and Ross MacDonald, Director of Sales & Co-founder of Portolio
Get in touch on 07388 361 564 or email to [email protected]
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