A rent freeze could hurt real estate investing - David Alexander

A rent freeze could hurt real estate investing – David Alexander

However, someone has yet to pay, and in connection with the housing rent freeze announced by Nicola Sturgeon in Holyrood last week, the men of autumn on this occasion are the private landlords of Scotland.

But make no mistake. This decision has repercussions beyond the real estate sector and should concern the broader business community somewhat.

Referring to the proposed increases in energy bills, our first minister said she is powerless to act on an issue that concerns Westminster but is determined to help people deal with the rising cost of living where appropriate. This included freezing the prices of train tickets and rents in the social and private housing sectors.

David Alexander is the CEO of DJ Alexander Scotland

Now given the re-nationalization of railways in Scotland, it appears that the Scottish government’s decision on fares is within its purview. Whether or not one agrees with the policy is a matter of debate (considering the 5 percent recently given to well-paid train drivers and the pending payment order from guards and ticket collectors, how the railways are financed, one might ask).

But putting government controls on what private companies (i.e. a company that provides long-term residential accommodation) could impose on their customers was starting to sound like rigid state socialism – the kind of system that Eastern Europeans so gleefully abandoned three decades ago and had no desire to return to.

The Scottish government’s position appears to be that the current cost of living is an emergency and rents have been frozen because people need a roof over their heads.

But more important than our presence is definitely more food than a warm home. If you cannot eat, it does not matter if you live in a cottage or a mansion.

Logically speaking, Nicola Sturgeon’s next step might be to force Tesco and Sainsburys to restrict the prices of staple foods like meat, poultry, fish and chips in their Scottish stores (let’s not forget that she already did so with liquor). And given that cooking these foods is also essential, perhaps the next step is to set limits on what B&Q can charge for the oven and stovetop they provide with each designer kitchen.

She won’t, of course, at least not now nor anytime in the near future. But the line was crossed in Scotland and who knows where it might end up.

So why did sturgeon choose private property owners and potentially get away with it?

The simple answer is that she can and so she did.

Sadly, this move will likely have significant public support, especially among tenants of course (when the government tells your landlord not to increase the rent, what’s not to like?).

“the angel? They are all fat cats and they can take damage,” a common but wrong perception – an attitude not helped by the Scottish government’s mixture of indifference and hostility towards the private hired sector.

Politicians are known to love free lunches but in the real world there is no such thing. At the end of the day, someone picks up the tab. And those tenants who will now be grateful to Nicolas for freezing their rents may change their tune within a year because the landlord has decided the rents no longer provide an acceptable return on investment and give them notice to quit as he sells up. Then they may find it difficult to secure alternative accommodation – because many other owners have decided to act similarly.

But the most disturbing aspect of all this is the Scottish government’s interference in the market and the negative signals it is sending. Who would want to invest in real estate in Scotland right now – whether it’s a one-bedroom apartment in Leith or a modern 20-storey building on the waterfront in Glasgow?

David Alexander is the CEO of DJ Alexander

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