Are you considering property investment in Edinburgh? If you are, good for you! You’ve been able to anticipate what we’re about to tell you in this guide: now is a great time to invest in property in Scotland’s capital city.
Numbers from several different sources show that Edinburgh’s property market continues to thrive and grow. This is happening while across the UK as a whole, property prices are experiencing much slower growth.
In this guide, we’ll go over some of the latest research on the kind of return on investment you can expect from your property investment in Edinburgh. We’ll go over some reasons why Edinburgh is such a good city for buying property and name some of the most exciting neighbourhoods for your investment. You’ll also get examples of the kinds of properties in these areas that would make the strongest additions to your property portfolio.
Read on to discover the essential things you need to know about property investment in Edinburgh in 2019.
Why invest in Edinburgh?
Edinburgh is a fast-growing and vibrant city in terms of infrastructure and innovation. Many companies in the financial and tech sectors have large offices in the city. Between its four different universities, Edinburgh boasts a student population of over 75,000. A good number of these students opt to stay in Edinburgh, making it the most educated city in Scotland, with 50% of the workforce holding a university degree.
The city has two UNESCO world heritage sites: the medieval Old Town and Georgian New Town. This stunning city is the second most popular tourist destination in the UK after London. It’s also one of the top 10 best cities in the UK to live and work according to research by PwC. These facts make Edinburgh a very profitable city for property investment both in the long-term and short-term rental markets.
In recent years, there has been lots of regeneration happening in several areas in the city. This might be most noticeable in neighbourhoods west of Haymarket Station, such as Fountainbridge, Dalry and Gorgie.
These areas are close to the city centre to the east and the Gyle to the west. The Gyle is home to the headquarters of many large financial institutions. This makes these areas attractive to young professionals. That’s why these areas offer some of the best opportunities for property investment in Edinburgh.
There are also large developments taking place on the site of the old St James shopping centre at the top of Leith Walk. This means that the areas around it can expect a boost in property value over the next few years.
Edinburgh vs. the rest of the UK
There are many factors that make Edinburgh an especially attractive prospect for property investment in contrast with the rest of the UK. For example, the property market in Edinburgh moves very fast. This makes the process of buying and selling flats quicker and more fuss-free than in other parts of the UK.
2019 research by Zoopla showed that on average, it takes just 27 days to sell a flat in Edinburgh. This makes it number one in the UK alongside Falkirk. Across the UK, selling a flat takes 56 days on average.
Property values in Edinburgh also continue to show growth. This is despite the fact that property value growth in the UK as a whole has slowed down in recent years. In 2018, Edinburgh saw average house prices rise 9% from £242,807 to £264,745. Meanwhile, average house prices across the UK rose by 3.6%, from £224,502 to £232,554.
Capital value growth in Edinburgh
As the numbers above show, Edinburgh property investment generally offers a very good return on investment. Research by Knight Frank into property investment across 43 cities all over the world showed Edinburgh faring very well. The city had the third-highest year-on-year price rises out of all the cities surveyed. This growth was an impressive 10.1%.
Meanwhile, the same research showed London prices falling by 2.9%. In general, there’s been major economic growth in the northern parts of the UK in comparison with London, where prices have always been high.
London property prices have risen so much that the capital has become unaffordable for many people. There’s been lots of regeneration across cities in Scotland and the North of England in recent years, which means that London is now facing serious competition from these more affordable urban areas.
It’s also worth noting that investors with experience of the Edinburgh property market remain relatively unfazed by Brexit. A 2019 survey showed that 85% of the investors polled felt confident about investing in the Edinburgh property market in the near future despite Bexit uncertainty. This means that the growth that the Edinburgh property market has been showing recently is unlikely to suffer majorly from whatever happens next in the UK’s journey towards exiting the EU.
Your estimated yield from Edinburgh property investment
With a large population of renters between the students, young professionals and families in Edinburgh, property investors can expect a nice yield on a buy-to-let property in the city.
A word of caution here, though: your estimated yield isn’t always a very useful figure to look at. This is because yield is your annual rent divided by the current value of your property. If you take out a mortgage to acquire your investment property, your initial investment is smaller than the property’s overall value. This makes your estimated yield a somewhat unhelpful figure.
That’s why it’s smart to focus more on your estimated return on investment and the potential growth in value that a property you’re considering has.
That being said, the typical Edinburgh rental property can expect an average of 4-6% yield for properties that are owned outright. This can raise over the 6% mark in certain areas, especially with HMO properties.
The EH8 area is the most profitable area for buy-to-let investors in Edinburgh. The average rental yield in this postcode is an impressive 10.6%. This is one of the highest figures in the UK. This postcode encompasses the areas around Holyrood Park and the University of Edinburgh.
Properties with an EH11 postcode can also expect good rental yields. These average at 8%, making it the area with the second highest yield in Scotland after the EH8 postcode. EH11 includes areas like Dalry and Gorgie which are popular especially among young professionals.
What is the best kind of property for investment in Edinburgh?
So far, we’ve already named some of the best areas for property investment in Edinburgh. To reiterate, areas west of the city centre, including Fountainbridge, Dalry and Gorgie are solid bets for both buy-to-let and owner-occupier investors. Bruntsfield and Polwarth are two other neighbourhoods in the western part of the city that offer good property investment opportunities.
These areas are especially popular with students and young professionals due to their excellent transportation links and the new bars, restaurants and cafes that seem to pop up every few weeks. One and two bedroom flats in these areas show the biggest potential for high rental yields and capital value growth.
Leith is another area that is among the best areas in Edinburgh for property investment of all kinds. As we mentioned earlier in this guide, developments are taking place at the top of Leith Walk. These are likely to boost property prices in the surrounding areas.
Additionally, Leith’s general regeneration and good transport links make this area an exciting opportunity for property investment. Leith’s abundance of trendy bars, restaurants and shops add their own charm to the area.
What to do next
If you’re interested in property investment in Edinburgh, our experts are ready to discuss the best options for you. At Cox & Co, we can help you find the greatest deals in the Scottish capital and advise you on the best ways to raise funds for your investment.
You can read more about investing in property with Cox & Co here.