After some experimentation it appears that devtool does not like running from a filesystem volume that does not contain my home directory. 

My current setup on a virtualized host has the following volumes:

Filesystem      Size  Used Avail Use% Mounted on

udev             32G     0   32G   0% /dev

tmpfs           6.3G  5.7M  6.3G   1% /run

/dev/sda         25G   11G   13G  46% /

tmpfs            32G     0   32G   0% /dev/shm

tmpfs           5.0M     0  5.0M   0% /run/lock

tmpfs            32G     0   32G   0% /sys/fs/cgroup

/dev/sdc        148G   39G  102G  28% /mnt/YB

tmpfs           6.3G     0  6.3G   0% /run/user/1000

My home directory is located on /dev/sda - devtool works for yocto projects on this volume

/dev/sdc - I added this volume so that I'd have more space while using yocto, but devtool complains and doesn't run here. I deleted the contents of /dev/sdc and re-tried following the tutorial given in my initial post. I can reproduce (e.g. create and run qemuarm images) everything upto the step where devtool needs to be used.

The short term solution would be to increase the size of /dev/sdc but this requires moving up to a more expensive plan from my cloud provider.

Any insight as to why this occurs