A British exit from the European Union could lead to a drop in demand at the budget end of Scotland’s rental market, a letting agent has predicted.

Releasing his firm’s latest quarterly rental tracker survey, the head of DJ Alexander Lettings told Scotland on Sunday that the effect of a Brexit would probably be “neutral” overall as it would be unlikely to impact on mid- to top-tier properties.

The agency’s most recent figures show a drop in applications for new tenancies from non-UK citizens, following a steady rise in tenancies taken up by people from partner countries in the EU last year.

“In our own case, the vast majority of tenants, whatever part of the world they come from, are in skilled employment,” managing partner David Alexander said.

“The inference I take from the Brexit debate is that even with an EU withdrawal a future British government will need to keep our borders open to people from abroad who can fill specific skills and entrepreneurial shortages.

“It’s true that there could be an overall drop in tenant demand if the door is closed on unskilled foreign labour or those motivated by benefits, but in that case it is the budget end of the market that would suffer.”

DJ Alexander said foreigners accounted for 28 per cent of new tenancies in February, down from 40 per cent in November. EU applicants accounted for slightly more than half of those from other countries. “This shows the market is both buoyant and fluid,” Alexander added.

“That 72 per cent of new tenants who described themselves as either British or Scottish reflects the ongoing high demand for rental accommodation among the native population, not least from younger spouses or live-in partners who are spending several years in rental accommodation while they save for the high deposits being demanded by mortgage lenders.”

The firm’s survey found a rise in rents being charged in Edinburgh from December to February, with an average of £750 per month for a one-bedroom flat and £932 for two bedrooms. Those figures were up from £715 and £893 respectively from the same period a year earlier.