With the door closed on 2019 and a new decade dawning here are our predictions for the Edinburgh letting market in 2020.
Rents and Property Prices will Continue to Rise
The political landscape is going to continue to have an impact on the property market. While the recent election result gives some relative certainty (!) the turbulence and uncertainty of Scotland and the UK’s political future will continue. Brexit should now happen in 2020 and there’s a chance of another independence referendum in Scotland which will spook investors and make buyers cautious. In more balanced markets in other parts of Scotland, this is likely to mean that rents and property prices will stagnate but the strong demand for housing in Edinburgh, compared with the relatively low supply of new properties in the next 12 months, means that the gap between supply and demand will continue to be significant and rent levels and property prices will continue to rise as a result.
Momentum will shift on holiday lets
The rise of AirBnB in the last ten years has led to a proliferation of holiday lets in Edinburgh. The holiday market has topped out in the last 2 years (the number of holiday lets in the city has plateaued) but there is a huge proportion of the city’s central housing stock being used for holiday lets. Legislation is slowly but surely making its way through the political process in order to reduce the number of holiday lets in Edinburgh. It’s not yet clear what form these controls will take but it’s likely new rules will lack strict enforcement and be slow to take effect. It’ll take years rather than months for new legislation to make a significant impact on the number of holiday lets in Edinburgh so while we will see some AirBnB properties coming over into the long-term rental sector or sales market in 2020, it will not be enough to make a dent in the overall housing picture. That will take longer.
Changes to Letting Market Seasonality
The private letting market in Edinburgh has adhered to an established seasonality for the last 10-20 years caused by the large student population and lucrative annual letting to high-paying visitors to the Edinburgh Festival. The new PRT (Private Rented Tenancy lease now compulsory in Scotland) is starting to change that. Private rented tenants are no longer tied in to a fixed period and landlords can no longer take their properties back to rent out to someone else for the Festival and then rent it back to a new long-term tenant. This has removed the “peak” the market previously saw around late August/September each year. Tenants are generally renting for longer (average tenancy lengths are currently around two and a half years) but with greater flexibility. This means that there is less enforced tenant turnover in the summer and an increase of tenant turnover in winter months where landlords previously would “lock tenants in” to tenancies over the winter months where void periods were traditionally more likely and hence, avoided by landlords where possible.
Build to Rent will not make a dent in 2020
Governments in Holyrood and Westminster see large scale institutional investment as part of the solution to a lack of housing stock. “Build to rent” (or B2R) is the name that’s been given to large scale institutional investors who build large, purpose built rental blocks housing usually 100-500 “units” or flats/studios. In cities like London, Manchester and more recently, Glasgow, tax breaks, incentives and assurances from Government has meant thousands of new B2R units have been introduced to the private rented markets creating much needed stock. The problem in Edinburgh is a lack of financially viable land on which to build in the city centre. There is a small pipeline of B2R developments coming in Edinburgh but not at a scale that will change the overall rental picture significantly and not in time to make any impact in 2020.
The private rented sector in Edinburgh is of increasing importance to Edinburgh’s economy and the wellbeing of its population which is what makes it so interesting to try to understand its impact on wider factors, and vice-versa. The rental sector in Edinburgh will continue to evolve and grow and affect the lives of everyone living in the city. 2020 is set to be another exciting and fascinating year.