Tuesday, 4 December 2018

Is the Edinburgh property capital growth v rental yields see saw broken?

In Edinburgh, I am speaking to more and more landlords, be they seasoned professional landlords or FTL’s (first time landlords), as they read The Edinburgh Property Blog that shows that the Edinburgh rental market is doing reasonably well, with rents and property values rising. 

When I was having a chat with one of these landlords over a latte in Cafe Contini the other day, he asked me two completely unrelated questions that got me thinking.  The questions were, how much faster are Edinburgh property prices rising than in towns around about Edinburgh and how much he should be paying per square foot?

Interestingly, we both thought that obviously Edinburgh property prices would be rising faster than towns around about but, going by my mantra of ‘never assume nuthing’, I did my research and was astounded by what I found.

Over the last 20 years, property values in Edinburgh have risen by 248.28% which is ever so slightly ..... but only every so slightly ..... more than towns around about Edinburgh – Musselburgh property values rose by 245.81% in this 20 year period, Penicuik property values by 242.34%, South Queensferry by 242.33%, Linlithgow by 242.33%, Dalkeith by 242.33%, Falkirk by 244.30% and Grangemouth by 240.05%.

This is an interesting result as it makes you wonder whether the historical view of the capital growth vs rental income see saw is broken.  The capital growth vs rental income see saw says that the higher the capital growth the lower the rental yield and vice versa. 

However, the property values research I did means that whilst the capital growth of Edinburgh property is growing faster than the surrounding towns it is only growing a wee bit faster whereas there is a significant difference in the rental yields between Edinburgh and the surrounding times – rental yields can easily be 6-8% per year in these towns whereas in Edinburgh you are lucky if you get 3-4% per year which, over a 20 year period, could be 70% more on average which is far far greater than the small differences in capital growth noted above. 

So is it time for Edinburgh landlords to have a re-think and consider buying properties outside Edinburgh?

What about the ‘how much he should be paying per square foot’ question I hear you say?  Well, that’s a topic for a future blog post .... watch this space.

Whether you are a landlord, a ‘Homes Under the Hammer’ addict or just a homeowner who is interested in what is happening to the local property market, then please visit the Edinburgh Property Blog (www.edinburghpropertyblog.co.uk), contact me for a chat (phone on 0131 603 4570) or email me (robert@thekeyplace.co.uk).

#edinburgh #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #firsttimebuyers #brexit #hardbrexit #cliffedge

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