Broker says demand for buy-to-let investment is waning as tax costs and tighter margins dampen landlord appetite across Scotland
Scotland's buy-to-let market is losing its appeal, with rising tax costs and thinning rental yields deterring landlords from new investment.
Alan MacKenzie (pictured top), founder and director of Your Next Step in East Kilbride, told Mortgage Introducer his firm, which serves clients across Glasgow, South Lanarkshire and beyond, has handled only a handful of buy-to-let cases over the past six months, with residential lending now accounting for the overwhelming majority of its work.
"I could probably count on one hand the amount of buy-to-let stuff that I've done over the last six months or so," he said. "There's not been a lot."
What is putting landlords off Scotland's buy-to-let market?
MacKenzie pointed to Scotland's Additional Dwelling Supplement (ADS) as a significant barrier to entry. The ADS is an additional charge on top of Land and Buildings Transaction Tax (LBTT) – Scotland's equivalent of Stamp Duty Land Tax – applied to purchases of additional residential properties, including buy-to-let investments. The Scottish Government raised the ADS rate from 6% to 8% in December 2024, making it among the highest such surcharges in the UK.
"There's always been a big off put to get into this space," MacKenzie said. "I understand why, because it was making it more difficult for people to get onto the property ladder when buy-to-let investors were gobbling up all the affordable homes."
He acknowledged the policy rationale but said the combined weight of tax costs, regulatory uncertainty and higher mortgage rates had stripped the sector of the returns that once attracted smaller investors. Buy-to-let investment in Scotland has fallen to just 5% of property sales, down from 10% in 2015, amid stricter rental regulations and the rising cost burden on leveraged landlords.
"It's not as profitable as it used to be if you're having to fund it with mortgages," MacKenzie said. "Younger people that wanted to get into the property market, when they're quite squeezed on the deposit that they have to put down, are looking at how much the yield is off it and seeing how long it's going to take to potentially generate money back to move on to the next one. It's just not worth it most of the time."
MacKenzie added that buy-to-let mortgage rates tend to fluctuate more and sit higher than equivalent residential products, adding further pressure on net returns for investors relying on mortgage finance.
Is buy-to-let becoming more professional in Scotland?
Despite the challenging conditions, MacKenzie said the broker process for buy-to-let cases had not become materially more complex, provided clients were taking appropriate tax advice. "As long as the client is getting tax advice from the relevant people and either doing it in their own name or through a limited company, the rules on how much money they have to have are pretty clear," he said.
When asked whether the sector has professionalised in Scotland – a trend observed more clearly among brokers in England – MacKenzie said he has not seen the same shift north of the border, but he pointed to one emerging model that was gaining traction.
He referenced Let Property, a platform that has identified a gap in the Scottish market by facilitating the sale of tenanted properties without requiring landlords to vacant possession first. "They found a kind of space where people can sell tenanted properties, it's a pretty straightforward switchover," MacKenzie said. "I think they are absolutely booming."
He said the model reflected a broader truth about the mortgage market, that specialisation was quietly reshaping segments of the industry that from the outside could appear uniform. "There's so many different arms to the mortgage world and people that specialise in this and that," he said. "Maybe there is a bit more of a professional side, but they're not really seen."
A busy firm in a two-speed market
Despite subdued buy-to-let activity, MacKenzie said Your Next Step was having its strongest year to date, driven by robust residential demand and the growing capacity of his four-person team. Scotland and the north of England have consistently outperformed much of southern England for house price growth and sales speed in 2026, according to Zoopla data, providing a strong backdrop for brokers focused on the residential market.
"August, September and October have been our biggest three months every year for the past four years now," MacKenzie said. "We've done significantly better in August this year than we did last year, which is good."
He said the firm's growth has been supported by a stronger referral pipeline, with estate agents increasingly seeking to direct clients to brokers with a proven track record. Brokers who invest in reputation and relationships have been well positioned to capitalise on Scotland's resilient residential market, particularly as landlord activity has receded.
"We're a proven broker now that everybody can see from reviews and social media and everything else that we do things properly," MacKenzie said. "I think that just naturally brings people as well. We’re just doing things right."
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
