An Update on the Edinburgh Market

Some Information on Edinburgh

Edinburgh is Scotland’s economic capital and, outside London, the strongest major city economy in the UK. Economic output per capita is higher than any major UK city outside London. Unemployment rates are lower than UK and Scottish averages, and jobs growth over the past five years (including 2021) has been faster than all but one UK city. 62.7% of the city workforce is degree qualified. More than any other UK city Only London plays host to more FTSE100 businesses in the UK than Edinburgh.

Edinburgh’s population is currently circa 554,000 which is an increase of over 125,000 since 1993 the population of the city is forecasted to increase to around 585,000 by 2030.

Sales Market

The property market in Edinburgh has historically shown resilience even during economic downturns, and the current situation is no exception. Limited supply combined with sustained demand has helped maintain both capital values and rental yields in the city.

The Office of National Statistics latest data set in March this year quote the average price of a property in Edinburgh stands at ￡324,262 up YOY by 1.4%

However, it is important to acknowledge that the current economic climate will undoubtedly impact on the local market. In recent months, the market in Edinburgh has been showing signs of softening, with a shift towards a more buyer-focused and price-sensitive environment.

According to the ESPC, the City of Edinburgh witnessed a 2.6% decrease in prices between February and April of this year, with the average price now standing at ￡280,629. However, it is important to delve deeper into the data as there are local variations. Areas like Stockbridge, Comely Bank, and Canonmills saw a 12.1% increase in prices for 2-bed flats, reaching an average of ￡327,435.

According to the most recent Hometrack UK Cities Price Index, the average property price in Edinburgh stands at ￡267,300, reflecting a 31% increase since 2007 and a 2.6% year-on-year increase. It appears that the market is readjusting to a more normal position after the post-pandemic frenzy.

I feel that rather than witnessing dramatic falls in property values, the market seems to be undergoing a reset towards a healthier and more sustainable level. This adjustment is a positive development after a period of unprecedented and unsustainable growth fuelled by the pandemic and historically low borrowing cost but sellers will need to readjust their expectations accordingly.

Rental Market

The rental market in Edinburgh continues to be dominated by a supply-demand imbalance, resulting in ongoing rental inflation for new tenancies. While the demand for rental properties has increased, the number of privately rented homes has remained largely static. In simple terms, the static supply of rental housing means that any new investment that adds to the supply is offset by properties leaving the sector as landlords rationalise their portfolios or exit the rental market.

According to Citylets, average rents in Edinburgh have increased by 13% in the last year and are now 67.9% higher than they were in 2013. There is intense competition among tenants for the limited available stock, with 38% of properties being let within just one week. The average time to let figure for the capital stands at 18 days. Two-bedroom flats have experienced the fastest rate of rent increase at 16.2% year on year, and they have also seen the largest increase of 78.5% over the past 10 years.

Student Sector

I think it would be interesting to look into the student market in a little more detail as it is coming to the time of year when those studying in the city will be looking for a place to live.

The total number of overseas students studying in the UK reached 680,000 in 2021/22, an increase of 122,000 in just two years, this is in part down to new visa rules. This in turn has boosted the numbers of people enrolled in higher education across the country.

In Edinburgh, there were a total of 69,815 students enrolled in higher education in 2022, with Edinburgh University hosting the highest number of international students from non-UK countries at 18,050.

This surge in student numbers has added to the supply demand imbalance for student style accommodation both traditional HMO style flats and also purpose built student accommodation (PBSA’s). The problem is further exacerbated due to a decline in the number of traditional HMO properties available for let in the city as landlords exit the market.

In a recent survey conducted by Slurp Edinburgh it was revealed that one in five undergraduate students or 21.1% had not confirmed a tenancy agreement by the beginning of the first semester, and 7.7% of undergraduates had still not signed an agreement by week five. As a result, student demand spills over into the wider rental market, particularly during the summer months when international borders continue to reopen.

Looking to the future, the survey also asked participants about finding accommodation in the following academic year. By November 2022, 50 per cent of respondents had already started making plans, and 80 per cent reported being worried about where they would live, a year in advance.

Market Outlook

Edinburgh remains well-insulated against wider economic shocks and continues to attract people looking to live and work in the city. This ongoing influx of people adds further pressure across all housing tenures in the city and demand for good quality rental stick will continue.

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