Glenham’s Investment Manager Charlie Inness wrote a column for The Scotsman on the huge potential offered by the property market in Edinburgh 2018, which was published on 25th January. Below is the text from the printed article.
WHY YOU SHOULD CARE WHAT THE PROPERTY MARKET IS DOING IN EDINBURGH IN 2018
With 400,000 properties for rent in the market across Scotland, the last year has seen a few milestones happen within the property market in Edinburgh:
- It is the first time that the average rent has tipped over £1,000 per month in the capital.
The sales market is consistently outperforming London.
- The population of Edinburgh is growing by 5,000 people per year but house building is not keeping pace.
- The University of Edinburgh says the city retains a huge 42 per cent of students after they have finished their degree, which means particularly the number of young professionals is growing rapidly.
- The effects of mortgage interest relief being phased out by 2020 are starting to be felt and fewer people want to remain as landlords.
- And new Private Residential Tenancy came into effect on 1st December.
This year promises changes and there are some key developments that we expect to see in the property market.
Firstly, there will be fewer letting agents. A new framework will be introduced in 2018 within the Housing (Scotland) Act 2014 where all letting agents will need to be registered and follow regulations, enforced with inspections.
Currently many letting agencies voluntarily abide by a code of practice. The larger and professional agencies will register, but the smaller agencies may decide that they do not want to follow regulations, or that it is not financially worth it, resulting in a small number of letting agents deciding to either amalgamate or sell.
Secondly, there may be even fewer properties on the market to rent and more properties to buy.
The reduction in mortgage relief and taxation are beginning to be felt. This will impact on landlords’ profits certainly on those who have potentially invested unwisely.
Some – potentially many – landlords will realise that due to the new tax rules, they will be making a loss on their rental property and decide to sell. This will put more stock on the market for purchase.
We predict that this will result in continued increasing rents. Fewer letting agents, fewer landlords and fewer properties will mean that prices will keep on rising. RPZ (Rent Pressure Zones) are highly likely to be introduced into Edinburgh next year but this will only come into effect for new contracts. In addition, it won’t stop prices going up, it will just stop them being increased by more than a certain percentage.
We also expect short term lets to continue to impact the market. Edinburgh is a hotbed of these as people realise huge returns on seasonal peaks such as the Fringe, Edinburgh’s Christmas and Hogmanay. This means that landlords may choose to short term let rather than long term let, reducing the available housing stock for rent or to buy for people who want to live and work here.
You can’t go wrong anywhere in Edinburgh, but the top three tips for places to buy in Edinburgh this year will be Dalry and Gorgie area due to the new Haymarket development, the Abbeyhill or Meadowbank area, and Newhaven.
We have seen huge leaps in those three areas and due to environmental factors this will only force prices up over the next 12-36 months.
Whether you are a tenant, landlord or investor in Edinburgh, you will be affected by the tremors within the property market in 2018 and everyone will need to be smarter about their role within it.