Tuesday, 20 September 2016

274% increase in 20 years in Edinburgh – interesting, very interesting

You find me in a reflective mood today as I want to talk about the future of investing in property in Edinburgh. The truth is that we have got fat and lethargic, with many people having mistaken the ever rising Edinburgh (and in fact the whole of the UK) property market since the 1960’s as the eternal gift that kept giving as property prices constantly rose and doubled every five to seven years.

The days of making money from property as easy as falling off a log, like taking candy from a baby are sadly over my Edinburgh Property Blog reading friends
With George Osborne and John Swinney having decided now is the time to milk the ‘Golden Cow’ of UK’s private landlords, with changes in taxation for buy to let property, and the UK having voted to leave the EU, many pundits are predicting the end of buy to let as we know it. However, it is still possible to make a reasonable, profitable and safe return on property with these changes. You see, I have always seen investing in the Edinburgh buy to let market (as I would anywhere in the UK), as I might see Mother Nature, creating some truly wonderful stunning warm weather but at the same time, she will bite, creating catastrophic situations such as snowstorms and hurricanes.  You need to study the market, take advice and opinions from many people and then decide what the proverbial property weather will be … remember, tenants will always want a roof over their head and I don’t see the Scottish Government building the millions of houses required to house them?

Nobody knows the future, and yes people can predict but I wouldn’t be afraid of this change ..... because as a famous French proverb says (I told you I was a reflective mood today), ‘the more things change, the more they stay the same’.  I mean, no one could have predicted how the property market has changed in Edinburgh over the past few years.

Fifteen years ago, 134,754 households (meaning 68.3% of properties) were owned, 32,810 (or 16.6%) were rented from the Council or other Social enterprises and only 25,091 households were privately rented (meaning 12.7% of properties were rented out by private landlords).

Roll the clocks on and the change has been seismic ….. the number of properties that are owned in Edinburgh have actually fallen to 127,335 (a massive 9.3 percentage point reduction to 59.0% of a higher number of properties in total (197,413 to 215,822)), properties rented from the Council or other Social enterprises have actually risen to 37,122 (or 17.2%) and the jump in private renting has been out of this world, as 48,992 properties are now privately rented, proportionally 22.7% which is a 10 percentage point increase (from 12.7%).

Also, if you had asked someone in 1996 to predict what would happen to property values over the proceeding 20 years (ie between 1996 and 2016), they might have predicted similar growth to the growth experienced over the previous 20 years (ie between 1976 and 1996), which was a very impressive 273.95%. Yes, property values in Edinburgh have increased over the last 20 years (between 1996 and 2016), but by a more modest 23.93% (and most of that can be attributed to house price growth between 2000 and 2006).

The property market is constantly changing and buy to let for too long has been heavily dependent solely on house price growth, where yield has been almost forgotten.  I see the changes in tax and landlord & tenant law and the uncertaitly caused by the EU vote in a different perspective to the doom-mongers and see it as bringing many opportunities. You might need to change your buy to let benchmarks, your approach to financing or even consider places other than Edinburgh in which to invest your money, but this will shine a light on investing in properties with healthier yields and create more realistic long term buy to let opportunities, instead of short term growth bets and wagers ..... this is what The Bank of England wants.

The advice I give to my landlords, and you my blog reading friends is this: these changes will make some landlords panic, meaning competition for decent Edinburgh buy to let bargains will reduce as fear of change kicks in and amateur investors flee the market. These opportunities will provide a more stable platform for knowledgeable and wise Edinburgh buy to let landlords to thrive in. 

If you would like to pick our brains about buying for investment purposes, please call me on 0131 603 4570 or email me on news@thekeyplace.co.uk.

A few more interesting articles about the Edinburgh property market:

  • Post Brexit property disaster - more like a ‘soft landing’ so far Nationwide claims http://bit.ly/2bW4zYB 
  • Capital growth AND rental yields are higher outside Edinburgh! Time for an investment re-think? http://bit.ly/2bi6g1n

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