This article was published on the City A.M. website on 30 September 2016 as part of Invest Edinburgh Talk.
An attractive capital, offering high value jobs, an educated workforce, stunning architecture, centuries of history, a peerless reputation for arts and culture and some of the best schools in Scotland, Edinburgh remains a highly sought after property market.
With demand sky high, across both the owner-occupier and private rented (PRS) sectors, prices and rental yields are on the up, helping to reinforce Edinburgh’s appeal among investors and developers.
With such strong supply and demand fundamentals in place, magnified by Edinburgh’s global appeal as an attractive city in which to live, work and invest, market confidence is buoyant – a fact borne out by developers’ interest and recent success in the city.
“Despite being a smaller city, transaction volumes are very similar to Glasgow, and in terms of total value of property sold, Edinburgh is approximately 60 per cent higher than Glasgow. In fact, the most accurate gauge of the health of the market, total market value of property sold, is up by 7.1 per cent in Edinburgh for the year.” explains Dr. John Boyle, Director – Research & Strategy at Rettie & Co, one of Scotland’s leading property specialists.
Edinburgh remains an attractive city in which to invest. In London, investors seeking to buy an average property will need to spend at least £500k, and real prices will be ahead of where they were in 2007 by as much as 20 per cent. As prices have been shooting ahead of rents, rental yields have dropped to around 3 per cent in the UK capital.
In terms of the number of transactions over the past 12 months, Edinburgh has increased 9 per cent year-on-year.Dr. John Boyle, Director – Research and Strategy, Rettie and Co
In Edinburgh, prices remain approximately 10-15 per cent down on their 2007 peak in real terms, meaning further room for recovery. In addition to the lower average entry price of £235k, rents are performing exceptionally well against house price growth, yielding 5-6 per cent on average.
So what does the future hold for residential property in Scotland’s capital?
“You can’t deny that there is uncertainty across the country. Here in Scotland, we’ve had two years of political uncertainty, which now looks set to be the norm across the whole of the UK for the foreseeable future,” says Dr Boyle.
“If uncertainty is therefore the new norm, then you just have to get used to it. As a potential investor you have a decision to make. Am I going to invest my money or have my capital sitting in a bank at a time of record low interest rates? With a potential Brexit deal looking at least three years on the horizon and a general election coming in 2020, how long do you wait? This is going to be a long and drawn out process, everyone just has to get used to this new environment.”
“Brexit will not affect the fundamental demand/supply conditions in the Scottish market, which will support market activity and prices going forward.”
Robust rental yields
“When it comes to renting property in Edinburgh, as long as the price is right, you can rent anything right now. We see strong demand in all parts of the city with longer term tenancies now more common place,” says Rob Trotter, Associate Director, D.J Alexander, the largest property management agency in Central Scotland.
“Brexit has made no difference to demand. For a central Edinburgh property, annual rental yields are holding steady at around 5 per cent, but if you go out to sought after areas on the outskirts of the city, that figure can increase to 6.5 per cent. With record low interest rates, that level of return means buy-to-let property remains an attractive investment option.”