Edinburgh has a thriving long-term private rental market, which has seen consecutive growth quarter on quarter, year on year, for more than eight years now.
We’ve been keenly awaiting Citylets’ report on Scotland’s private rental market performance for the first quarter of 2019 to find out if this growth trend is continuing, and the effect (if any) the political uncertainty surrounding Brexit has had on the sector. We also wanted to see if our experiences over the last quarter match those from across Edinburgh.
The private rental market in Scotland
The Citylets report notes some mixed signals from the private rental market, with some agents experiencing a cool down in the Central Belt. However, overall, there has been little change over the last year:
- The average time to let (TTL) is 37 days, matching the TTL in Q1 2018
- There has been a small increase in average rent to £793, which is up by 1.7% on this time last year.
- 51% of properties are let within a month – just 1% down on Q1 2018.
The private rental market in Edinburgh
Citylets’ findings reveal a mixed picture for Edinburgh’s private rental market, with agents reporting a slowdown continued beyond the seasonal norm. This is highlighted by an increase in average TTL – however average rents continue their increasing trend:
- The average TTL is 30 days, up by 3 days from Q1 2018.
- Average rents have increased by 5% year on year, to an all-time high of £1,115 per month.
- 61% of properties are let within a month – a 2% decrease from this period last year. 17% properties are let within a week, also a 2% decrease on Q1 2018.
The highest year on year rent increase is for 2-bed properties, at 6%, with 3-bed properties close behind at 5.5%.
Although the Edinburgh average TTL across all properties has increased by 3 days the TTL for 1-bed properties has decreased by 2 days on the same period last year, to 25 days. This is however still a significant increase on the 19 days TTL averaged for 1-bed properties in Q4 2018, again signalling some slowdown in the market beyond the usual seasonal dips.
Our experiences At Home In Edinburgh
A longer seasonal slowdown in long-term lettings
Long-term lettings in the private rental market are usually quieter at the end of Q4 and into Q1 of the new year, however this year we didn’t see the market pick up as normal in February and March. Rick McCann, At Home In Edinburgh Director, advised that there were noticeably less tenants enquiring about and viewing certain properties.
Despite this slowdown, the 1-bed market remained strong throughout as demand still outweighs supply. Due in part to this, our average TTL for Q1 2019 across all properties is 16 days; that’s almost half the Edinburgh TTL average. We feel this is a reflection on the quality of properties we manage, setting the correct rent levels, the resources we put into marketing properties and the tenants that we attract.
We felt the biggest impact of the slowdown with 2-bed properties, particularly those with monthly rents of around £1,000. Many of these properties have had unusually long vacant periods between tenancies, and for the first time in 8-10 years landlords have had to reduce rents in order to attract tenants. This is quite a change in mindset after a long period of steady increases in rental prices.
Rick advised that the start of the Easter holidays is historically a quieter period for the private rental market, but this year was the start of a turnaround in the volume of enquiries and viewings, with things getting back to normal for At Home In Edinburgh. It became clear when speaking to other agents and the Citylets team that we were all experiencing the same trends, and all finding challenges at the same price points.
As the economic conditions in Edinburgh have not changed, we suggest the quiet period has been due to Brexit uncertainty. Certainly, we are seeing less enquiries from foreign tenants; this has also been reported by other agents across the city and noted by Citylets.
Impact of Private Residential Tenancies – Student Lets
We are approaching the end of the first academic year since the introduction of Private Residential Tenancies (PRTs) and are experiencing a real impact on our student property portfolio.
Historically we have advertised our student properties in March and April for lets commencing at the start of the new academic year in September. However, as PRTs do not have a fixed tenancy period we don’t know when or if our student flats will become available. We therefore can’t advertise our student properties until the current tenants give notice.
Across Edinburgh there is a significant reduction in the student properties currently being advertised, and this is driving up rental prices. We have observed that it is particularly difficult for students coming out of university accommodation and trying to secure private residential properties for the first time. This is putting further upward pressure on rental prices.
Does Edinburgh’s private rental market still offer sound investment opportunities?
The short answer is yes: the continued strong private rental market growth, coupled with a continuing trend in capital growth, means that Edinburgh remains a strong location for buy-to-let investments.
Private rental market opportunities for investors
We continue to advise that the greatest investment opportunities within Edinburgh currently are 1-bed properties, where demand continues to surpass supply. This has been highlighted over Q1 2019.
Edinburgh itself continues to feature in the lists of top-ranking locations for buy-to-let investments, such as those compiled by Simply Business and Seven Capital. Now is an ideal time to enter Edinburgh’s private rental sector or to extend your property portfolio, taking advantage of the strong ROI offered with opportunities for long term capital growth in addition to high rental yields.
We can help potential investors identify sound investment properties with our free, no-obligation, Buy-to-Let Assessment service. This gives an honest, expert assessment of a property’s potential for long term lets on a PRT and short term lets on a holiday let contract. Our friendly, professional team is always happy to help, so if you’d like an informal chat just give us a call on 0131 229 4001 or email us at [email protected].