Investing In property in edinburgh
With rent caps, eviction moratoriums and short-term let licencing all impacting Edinburgh’s private rental market throughout 2023, it’s been a rocky few months for the city’s landlords.
Continued uncertainty and high mortgage interest rates means some landlords may consider selling up and leaving the rental market altogether by the end of 2024. But high demand for rental properties and the ability for landlords to once again increase rents could encourage others to stay the distance and ride out the storm.
The Citylets Q1 Quarterly Report 2024 paints a picture of a more stable market in Edinburgh, where average rents peaked at £1,550 a month in Q3 2023. However, the shortage of rental properties in Scotland’s capital is reflected in the low number of new starts and completions in the private rented sector.
Most rent restrictions are now lifted
At the end of 2023, the rental market in Edinburgh remained unusually buoyant despite ongoing restrictions on landlords, and we saw strong demand for all types of homes between October and December.
Most restrictions have now been lifted, with evictions able to take place once again. Rent increases, previously capped at 3% to protect tenants during the cost-of-living crisis, can now be raised by landlords to bring them in line with market values. However, tenants can now refer rent increase notices for adjudication by a rent officer if they feel the rise is excessive.
Confusing rent rise calculations
However, rather than removing the cap altogether, the Scottish Government has introduced a confusing tapering system that landlords must use to calculate any increases.
If the gap between the market rent and the current rent is more than 6%, the landlord can increase the rent by 6% plus an additional 0.33% for each per cent that the gap between the current rent and market rent exceeds 6%, as per the formula set out in the Rent Adjudication (Temporary Modifications) (Scotland) Regulations 2024. The total rent increase cannot exceed 12% of the current rent.
Some landlords may need to go back to school to work out what they’re allowed to charge!
Market reset for many properties
Many tenants have benefitted from the cap, fixing rents well below the rocketing market rate, and these are now expected to be revised which will reset the market. Property stock levels in the city could be impacted by the evictions that are now able to take place, putting more homes back into circulation, and it will be interesting to see the wider impacts of all these recent changes.
The average rent in the city is now £1,481 – a fall from the record high in Q3 2023 but nonetheless a 7.9% increase on 12 months ago. 80% of one-bedroom flats were let within a month in the first quarter of the year, with the average being just 18 days, but larger properties are now taking longer to turn around.
Only 38% of four-bedroom properties were let within a month between January and March, and half of all available three-bedroom homes took more than a month to secure tenants.
At Clan Gordon, we’ve helped our landlords and tenants to weather the storm of the pandemic and the cost-of-living crisis, and are well positioned to offer expert advice on all aspects of renting in Scotland’s capital city.
Schedule a no-obligation call with one of our expert property managers if you’re looking for a letting agent who knows how to ensure you enjoy a stress-free and successful letting experience.