Winter is Coming for Holiday-lets in Edinburgh. The rental property landscape in Edinburgh has changed dramatically over the last 10 years. Since the global financial crisis of 2008, the average age of a first-time buyer has risen to over-30 meaning people are renting for longer. By 2021, a quarter of households in the UK will be in the private rented sector and the overall population is growing. The demand for quality properties in Edinburgh for long-term rental from professionals tenants has never been so high. There are a couple of key factors affecting the Edinburgh market specifically.
Holiday letting in Edinburgh is a saturated market
The incredible global success of AirBnB has made holiday letting a common choice for visitors. Many property owners have chosen the holiday letting route tempted-in by the high incomes available and the flexibility of using their properties sporadically for personal use. The reality of high running costs and onerous “hosting” responsibilities has not met the expectations of many property owners and now Edinburgh has reached the point of peak holiday listings. The market is saturated.
In 2017, there were 9,638 properties in Edinburgh listed on AirBnB and this figure has continued to rise. During the world-famous Edinburgh Festival, the demand for accommodation from visitors is high enough to sustain this volume of listings but once the Festival comes to a close at the end of August, the Festival visitors leave and the tourist population drops dramatically. This means that thousands of AirBnB listed properties will be competing for far fewer potential guests. For property owners with holiday lets, a long winter of lower income and extended vacant periods will soon start. September to December 2018 will see these market conditions like never before due to the high number of properties on the holiday letting market. There is simply not enough demand to sustain the over-supply of holiday-let properties.
Long-term letting market experiencing under-supply of properties
There are more private tenants looking for quality long-term rental properties in Edinburgh than ever before. There are fewer new landlords coming to the market due to the recent tax changes discouraging potential investors. The properties that are already in the private rented sector are occupied for longer (Umega’s average tenancy length is approaching 3 years) meaning that the number of re-lets being advertised at any given time is less than it was when tenancy lengths were shorter. Fewer new properties coming in to the sector and longer tenancies mean that the number of available properties on the market is very low. With demand from tenants high there are simply not enough quality properties on the rental market and the result is rents are rising rapidly. This may be welcome news for landlords but it’s not a good situation for the sector to be in.
Landlords will move from short-term to long-term letting
Once we enter the winter months of 2018/19, the saturated market conditions in the Edinburgh holiday letting market will impact the profitability of holiday-lets for property owners and many will switch over to long-term letting. This is good news for the city and for the stressed tenant market. Good news also for these property owners who will have longer and more sustainable tenant relationships and will be better-off financially due to the lower running costs and reduced overheads of long-term letting where tenants pay the bills for council tax, cleaning and utilities. Read more about Holiday-Let vs Long-term Let here.
Legal Changes are coming for holiday-lets
Edinburgh Council have been explicit that they see the problem of high numbers of holiday lets and under supply of the long-term market. There are plans underway to make changes to restrict the number of holiday-lets in the city. What this will be is not yet clear but legislative changes are on the way to drive properties back into the long-term private rented sector. Watch this space.
If you have a property that you rent currently as a holiday let in Edinburgh, give us a call to discuss how long-term letting might work for you.