Edinburgh Rental Market Quarterly Report: Trends, Analysis, and Insights for Q2 2023

The rental market in Edinburgh has seen both challenges and opportunities in recent years, but the overall supply currently falls 20% short. This persistent scarcity has been exacerbated by insufficient new housing developments and recent government legislation that has deterred property owners from entering the rental market.

Properties in Edinburgh are renting at an accelerated rate compared to previous years, reflecting the competitiveness of securing desirable rentals in this sought-after city. With limited options, prospective tenants must act swiftly when finding their ideal home.

As we move forward into the rest of 2023, this supply-demand imbalance is expected to persist, making it crucial for renters to remain vigilant and proactive during their property search. Whether you are a student looking for suitable accommodation near your university or a professional seeking a convenient location close to work, understanding these ongoing dynamics will play a significant role in navigating Scotland's capital city rental market.

One noteworthy aspect of the Edinburgh rental market during Q2 2023 has been the increase in rental rates across various property types. As demand outpaces supply, some landlords have leveraged their position to increase rental prices. At Clan Gordon we regularly review rents in line with market value to ensure they are fair and accurate.

The cap on rent increases for existing tenants means the gap is widening between current and new tenancies. While landlords can only increase existing tenants' rent by 3% (or 6% in certain circumstances), new tenancies have no limit beyond what the market will support. 

The increased rental rates can be attributed to several factors, including limited supply, growing population, and ongoing demand for housing from different demographics. While this may present challenges for renters in Edinburgh, it also indicates potential opportunities for landlords to maximise returns on their investments.

It's important to note that different areas within Edinburgh have displayed varying levels of rental rate growth. For instance, neighbourhoods such as EH8 have shown favourable rental yields for flats at 6.8%.

As a prospective tenant, these rising rental rates require careful consideration when budgeting for accommodation. It is essential to thoroughly research and compare options while staying informed about market trends and insights to make well-informed decisions.

The Edinburgh rental market has experienced a persistent supply-demand imbalance, leading to ongoing rental inflation in the city. This issue arises from the limited availability of rental properties compared to the high demand from tenants. The result? Increasing average rental rates and intensified competition among renters.

The supply of rental properties in Edinburgh has remained restricted, with a decrease of 10% compared to the previous year. Meanwhile, the number of enquiries per advertised property averaged around 100, highlighting the scarcity and desirability of available rentals.

Several factors drive the strong demand for rental properties. First, Edinburgh's economic vitality and status as Scotland's economic capital continue to attract people looking to live and work within the city. Additionally, the surge in international student enrolment has increased demand for student accommodation.

This supply-demand imbalance contributes to ongoing rental inflation for new tenancies.

In Q2 2023, the Scottish rental market experienced significant growth despite the introduction of a rent cap by the Scottish Government. Across Scotland, average rental rates for new tenancies rose by double digits for the third consecutive quarter, reaching an average monthly rate of £1,081.

Edinburgh specifically witnessed an impressive surge in rental rates during this period. (Average rent increased by 15.1% year-on-year, bringing the average monthly rent to £1,477.) Notably, two-bedroom properties experienced the largest increase in rental rates with a significant rise of 17.4%, reaching an average of £1,362 per month.

While the average time taken to let a property in Edinburgh was 14 days, one-bedroom properties were being snapped up within just nine days – statistics illustrate the speed at which properties attract tenants due to the limited supply.

Overall, the Q2 2023 rental market in Edinburgh demonstrated substantial growth and witnessed significant increases in rental rates across various property types. The ongoing supply-demand imbalance continues to impact the market, necessitating renters to be proactive and flexible when searching for suitable accommodation.

When it comes to the Edinburgh rental market, understanding the different property types and their corresponding rental prices can provide valuable insights for both tenants and landlords. Let's look closer at the various property types and how their rental prices stack up in Q2 2023.

One-Bedroom Apartments: One-bedroom apartments are often sought after by young professionals or couples looking for a cosy space in the heart of the city. These properties tend to command higher rental prices due to their desirability and prime locations. In Q2 2023, the average monthly rent for a one-bedroom apartment in Edinburgh was £999. 

Two-Bedroom Apartments: Two-bedroom apartments offer more space and flexibility, making them attractive options for small families or individuals looking for a spare room or home office. The rental prices for two-bedroom apartments can vary depending on factors such as location, amenities, and property condition. On average, you can expect to pay around £1,362 monthly for a two-bedroom apartment in Edinburgh.

Houses: Houses are ideal for those seeking more space and privacy. Whether it's a terraced house, semi-detached, or detached property, houses provide tenants with additional rooms, garden access, and potentially allocated parking spaces. The rental prices for houses typically reflect their size, location, and overall condition. In Q2 2023, the average rent for a three-bedroom house was £1,917 and £2,729 for a four-bedroom property.

Now that we have a better understanding of the various property types and their corresponding rental prices in Edinburgh, let's shift our focus to the speed at which these properties are being let out.

In a wildly competitive rental market like Edinburgh, where demand often outweighs supply, tenants and landlords alike must be aware of which property types are being snapped up quickly and those that may take more time to find tenants. Here is an overview of the fastest to slowest letting properties in Q2 2023.

One-Bedroom Apartments: One-bedroom apartments continue to be highly sought after in Edinburgh, thanks to their appeal to young professionals or individuals seeking compact living spaces. As a result, one-bedroom apartments were the fastest-letting properties in Q2 2023.

Two-Bedroom Apartments: Similar to one-bedroom apartments, two-bedroom apartments also enjoy good demand due to their versatility and suitability for small families or individuals looking for extra space. While they may take slightly longer to let compared to one-bedroom apartments, they still fall within the category of relatively fast-letting properties. In Q2 2023, the average let time for a two-bedroom flat was 15 days. 

Houses: Houses, especially those with more bedrooms, tend to have a narrower pool of potential tenants than apartments. This can make them take longer to let, as finding the right tenant with matching preferences for the property's size and location may require more time and effort. However, acute demand means the average time to let a three or four-bedroom house was just 17 days. 

It's important to note that while these property types may fall into different categories of letting speed, market dynamics can vary from one area to another within Edinburgh. Location, amenities, and rental prices can influence the demand for specific property types in specific neighbourhoods.

Think of the rental market as a race with multiple tracks. The popularity and demand for each property type determine how quickly it gets rented out on its respective track.

The rental market in Edinburgh during Q2 2023 was influenced by various factors contributing to its notable trends and changes. One significant influence was the overall demand and supply dynamics. The demand for rental properties in Edinburgh continued to surge, outweighing the available supply. This resulted in increased competition among prospective tenants, leading to rising rental rates across the city.

Additionally, the introduction of a rent rate cap of 3% by the Scottish Government had an impact on the market. New rents experienced double-digit growth, defying expectations with that increase of 15.1% year-on-year.

To put it into perspective:

• Average rental rates for new tenancies in Scotland rose 11.4% year-on-year to £1,081 per month.
• In Edinburgh, the average rental rate reached £1,477 per month.

Equally important was the decline in stock levels within the rental market. Compared to the previous year, there was a 10% decrease in available properties for rent in Scotland. This scarcity of options intensified competition between potential tenants and resulted in an average of 100 enquiries per property advertised.

Imagine being a prospective tenant during this competitive period - you would have to act swiftly and decisively to secure a desired property due to high demand and limited availability.

Moreover, it is crucial to consider the average time it took for properties to be let out. Across Scotland, the average time to let was 19 days during Q2 2023. One-bedroom properties were particularly sought after as they rented out the fastest, with an average time of just 16 days.

Edinburgh, being a highly desirable location for renters, exhibited even more accelerated rental processes. Astonishingly, 42% of properties in the city were let within a week, and the average time to let was only 14 days. The average time to secure a rental for individuals seeking one-bedroom properties was just nine days.

All these factors - high demand, limited supply, rising rental rates, and swift rental processes - collectively influenced Edinburgh's Q2 2023 rental market. These dynamics demonstrate the city's rental market's competitive nature and the challenges tenants and landlords face.

Now that we have examined the influences on Edinburgh's Q2 2023 rental market, let's turn our attention to future predictions for this dynamic sector.

While it is always challenging to forecast with absolute certainty, several experts and industry insiders have provided insights into the future for Edinburgh's rental market.

One school of thought predicts that rental rates will continue to grow at a steady pace due to the persistently high demand and restricted supply. This argument is supported by the ongoing scarcity of available properties and the projected population growth in Edinburgh. As demand continues to outpace supply, it is reasonable to assume that rental rates will likely experience upward pressure.

It can be likened to a game of musical chairs where there are fewer chairs (rental properties) than people (tenants). As long as this fundamental imbalance remains, competition and rising prices are expected.

However, other insight suggests that external factors may dampen rental growth in Edinburgh. Repeated Bank of England base rate rises and higher mortgage rates could incentivise some prospective tenants towards homeownership instead of renting, making an investment on the property ladder before rates rise further still. Additionally, factors such as inflation, tax changes, and regulations may impact landlords' willingness to invest in the rental market, potentially impacting overall supply.

A higher base rate could increase mortgage costs for landlords, making it less profitable to rent out properties. This could lead to a slowdown in the market and potentially alleviate some of the competitive pressures tenants face.

Ultimately, the future of Edinburgh's rental market remains uncertain, and predictions must be taken with a grain of salt. However, monitoring these influential factors and industry insights can provide valuable guidance for prospective tenants and landlords. That’s where we can help.

For expert information about Edinburgh's rental market and the property management services we offer, schedule a call with a member of our team today.