Podcast: What’s been happening in the Edinburgh lettings market

In this episode of the ESPC podcast, Paul and Megan are joined by Nicky to dive deep into the Edinburgh lettings market. Along with discussing key topics such as rent controls, market demand, and the ongoing housing shortage, Nicky shares her expert insights on rental yields, hot property investment areas, and the challenges faced by both tenants and landlords.

Whether you're a landlord, tenant, or just curious about property investment, this episode is packed with valuable information. Learn about the best areas for rental returns, the effects of rent caps, and practical advice for navigating Edinburgh’s competitive property market.

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Key Insights

Edinburgh's Rental Demand

The significant shortage of rental properties in Edinburgh has been intensified by an influx of students, professionals, and researchers, with the start of a new university term. Factors contributing to the high demand include tenants staying longer in their current accommodation to avoid the higher costs associated with moving and securing new leases. Additionally, some landlords are selling their rental properties due to personal financial reasons, further reducing the available housing stock.

Impact of Rent Caps and Controls

While landlords now have the ability to increase rents, many are doing so cautiously to retain good tenants and avoid causing financial strain. Tenants can appeal rent increases by involving rent officers who assess whether proposed increases are fair, typically capping increases at 12%. The team discuss the importance of communication and negotiation between landlords and tenants to reach amicable agreements without resorting to lengthy and complex appeal processes.

Popular Areas for Investment

Nicky provides detailed insights into the best areas in Edinburgh for property investment based on rental yields:

EH3 (West End, New Town): Traditionally expensive with lower yields, but now offering gross yields of 7.6% for one-bedroom flats due to rising rents balancing out purchase prices. The area is highly desirable due to its central location and excellent transport links.
EH8 (Meadowbank, Abbeyhill, Newington): Offers yields of 7.1% for one-bedrooms and 6.5% for two-bedrooms. These areas attract a diverse range of tenants, including students, professionals, and families, due to their amenities and proximity to the city centre.
EH11 (Gorgie, Dalry): Known for yields of 6.4% for one-bedrooms and 6.3% for two-bedrooms. These areas remain popular due to their affordability and accessibility.

Property Market Challenges

There are broader challenges facing Edinburgh's rental property market, notably the housing shortage. Contributing factors include landlords selling properties, fewer new rentals entering the market, and increasing demand from a growing population. The hosts discuss "hidden homelessness," where individuals are not captured in official statistics but lack stable housing - such as people staying with friends or family because they cannot find their own place. This shortage not only affects tenants but also poses challenges for landlords and investors navigating a highly competitive and regulated market.

Advice for Landlords

Paul, Megan and Nicky discuss practical advice for landlords, such as include budgeting for additional taxes like the Land and Buildings Transaction Tax (LBTT) and the Additional Dwelling Supplement (ADS), which is an extra 6% on top of LBTT for additional properties. They also highlight the benefits of investing in one-bedroom flats, which tend to have lower purchase prices, lower taxes, and high demand from tenants, making them a smart investment choice.

Tenant Application Process

There’s also advice for tenants in the episode, provides strategies to improve their chances of finding a rental property in a competitive market. Tips include being proactive in searching for properties, promptly responding to listings, preparing all necessary documentation in advance, and writing a compelling cover letter to accompany applications.

Future Outlook for Edinburgh’s Property Market

With potential for more landlords to enter the market, which could help alleviate the housing shortage, the discussion ends on an optimistic note regarding the future of Edinburgh's rental property market. The enduring appeal of Edinburgh as a desirable location for living, working, and investing suggests that property values and rental demand will likely continue to rise.

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