The Effect of New Builds on the PRS in Scotland

If you live or travel in Scotland, and around the Edinburgh and Lothians area in particular, you cannot help but notice building sites everywhere you look, with new houses springing up like daffodils in spring.

This is all part of the effort to increase housing supply generally, and to create more commutable housing around Edinburgh in particular.

Has this activity had a direct impact on the private rented sector (PRS)? Has the PRS been able, or willing, to engage with this increase in available properties?

With many years of experience in the buy-to-let market, we’re going to examine the level of new building and whether it’s affecting the PRS.

New house building in Scotland

It’s one thing to see seemingly endless building sites and another to actually delve into the numbers. Sadly, the evidence of our eyes is not reflected in the house building statistics.

All sector starts and completions:

Private sector starts and completions:

It’s immediately clear from these charts from the Scottish Governmentthat in spite of the nearly year-old declaration of a national housing emergency, numbers of starts and completions are, at best, holding level, if not falling.

Despite attempts by the Scottish Government to put a positive spin on the current situation, there appears to be solid evidence that housebuilding in Scotland is progressing in Scotland in only the loosest sense.

Writing in Estate Agent Today, David Alexander of DJ Alexander states the following:

“The number of all sector newbuild starts in Scotland fell by over 9.0% in 2024.

The latest data from the Scottish Government’ s housing statistics quarterly update showed that newbuild starts between 2023 and 2024 fell by 1,538 (-9.3%) from 16,588 to 15,050 which is the lowest 12-month figure since 2013.

These numbers are 3,958 and 6,399 lower respectively than the pandemic years of 2020 and 2021.

The drop in private sector newbuilds was 1,605 (-12.1%) lower falling from 13,222 to 11,617. This is the lowest annual figure since 2013 when 10,987 homes were started.

The data for the social housing sector is almost completely static with just 67 more homes started in 2024 rising from 3,366 in 2023 to 3,433 in 2024. Apart from last year you have to go back to 2012 to get a lower annual figure than this.

Of further concern is that there is a wide range of newbuilds by area with some parts of Scotland barely building and others experiencing a boom.

Edinburgh has the highest number of all sector newbuilds at 2,126 which is 14.1% of the total. Glasgow city, however, only had 459 newbuild starts which is just 3% of the total and the lowest annual figure ever since this data began being collated in 1996.

Fife had the second highest figure at 1,634 with West Lothian the third greatest at 1,096 which means that just under a third (32.2%) of newbuilds are starting in and around Edinburgh.

If you add in Midlothian and East Lothian, the figure rises to just under 42% of all newbuild starts in and around the capital”.

We’ve quoted David’s words at length because they illustrate the paucity of housing developments against the claims and ambitions of the government, and highlight the geographical concentration of what is being built.

Note: Although the article from which we’ve quoted is recent (April 2025), the figures have been overtaken with more recent government numbers. Elsewhere, we have used current figures.

Effect of building expansion on the PRS

It would be tempting to make assumptions based on the building work we see about the effect that this might have on the PRS. However, as we said above, the numbers matter, and tell a rather different story.

The number of new homes, of all tenures, being completed isn’t anywhere near as large as we all probably think.

In the year 2024-2025 to date, 19,288 new homes were completed. Sounds a lot but it represents only 0.75% of the total number of homes in Scotland, currently some 2.55 million.

Moreover some 42% of completed new builds in Scotland serve the capital. That percentage includes Edinburgh, the Lothians; Mid, East and West, and Fife, leaving only 58% to serve the rest of the country.

While that looks substantial, of the 19,288 builds completed, that percentage represents 8,101 homes, split amongst five local council areas. Fife is second only to West Lothian in percentage of homes completed.

According to the 2022 census, the PRS supplies 23% of all homes in Edinburgh. Looking at Scotland overall, some 323,000 households rely on the PRS to provide their homes.

Tenure of housing in Scottish local authority areas

Nothing here would suggest that the PRS stands to lose or gain from the level of new builds being completed in Scotland.

Lack of supply should keep prices buoyant making for less attractive investment in new builds, and some of the 19,288 completed are affordable rent or social housing, bringing the number on the open market to nearer 14,000.

Advice from the property pros

It would be tempting to look at fields of houses rising all around us and either think of the benefits which might fall to the PRS, or worry that increased home ownership will further damage the rental market.

In reality, the current level of home completion is unlikely to have any significant effect on the PRS, positive or negative. The number of properties being completed are far below the number needed, regardless of what the Scottish Government says.

Consequently, the 323,000 households that currently depend on the PRS to provide their homes isn’t going to change significantly unless this level of delivery can be dramatically increased.

It’s also worth remembering that new builds are not necessarily the best investment for buy-to-let landlords, better returns may be found within the capital itself rather than several miles away.

Therefore the effects of new builds on the PRS are, at present, unlikely to be significant, and while the sector may lose some renters to home ownership, demand suggests that new tenants will be found to replace them.

In summary…

Despite the challenges which face the PRS, it is well entrenched within the Scottish housing market, and the current level of home completion alone is unlikely to change that.

Not all renters are sitting poised to jump feet first into home ownership. There are many good reasons to rent, it’s not just a holding operation until you can buy your dream home.

So while home building matters to the market in general, it doesn’t destroy the arguments in favour of investing in buy-to-let properties.

If this is something you are interested in, get in touch and let’s talk. We understand the market and can guide you towards investment opportunities that will match your goals.

These are interesting times, and it’s easy to assume that all of Scotland is being built upon. It’s not and there is still a vibrant rental market serving the diverse needs of Scotland’s people.

Thanks for reading!

Written by Ross MacDonald, Director of Sales & Cofounder of Portolio

Get in touch on 07388 361 564 or email to [email protected]