Complete 2023 Guide.

Edinburgh Property Investment

Property Investment Edinburgh 2023

Scotland’s largest city and capital, property investment in Edinburgh remains one of the UK’s best places to invest.

After a decade of consistent growth that has seen house prices rise by over £100k, property investment in Edinburgh could be the perfect choice for you in 2023.

But should you invest in Edinburgh in 2023? Are there better options out there?

Keep reading to find out why you should (or shouldn’t) invest in Edinburgh.

Is Property In Edinburgh A Good Investment In 2023?

You might be wondering:

Is property in Edinburgh a good investment?

Edinburgh was voted the second-best UK city for residential property investment in 2021.

This is for a good reason:

Although house prices are on the steeper side, Edinburgh has one of the UK’s most exciting rental markets with high income and a rapidly rising population.

Many property investors from across the globe have noticed the potential of Edinburgh property investment, with real estate now a massive part of the Scottish city’s economy.

Property accounts for about 12% of the city’s economy – a welcome sign for investors as it shows an active housing market.

There was a whopping 12,735 house purchases in Edinburgh in 2021, according to the Land Registry – 2.2 times more than Manchester!

So, if you want an active housing market with strong returns on offer, then investment property in Edinburgh could be for you.

Here are five more reasons why you should consider a property investment in Edinburgh this year:

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Why Is Edinburgh A Good Investment?

Strong House Price Growth

If you’re interested in buying real estate for long-term growth, Edinburgh property investment is a top choice in 2022.

Average property prices in Edinburgh were £324,947 in April 2022 – an increase of over £53k since April 2020.

This growth level has continued over the last few years, with prices rising by £100k since April 2017 and £125k since April 2012.

In context, this capital growth is some of the most impressive in the UK.

City Average House Price 12-Month Price Growth Five-Year Price Growth 10-Year Price Growth
Glasgow £163,494 9.07% 40.30% 63.59%
Manchester £221,485 9.02% 38.42% 83.81%
Birmingham £223,037 8.30% 33.12% 69.87%
Leeds £231,692 11.37% 36.86% 68.55%
Edinburgh £342,947 11.55% 44.64% 62.81%
London £529,829 7.86% 10.43% 77.16%

 

As you can see from the table, Edinburgh has the highest price growth over a 12-month and five-year period than the other major UK cities – even London.

In fact, the only category that property investment in Edinburgh doesn’t outperform the others is over a 10-year period – registering the worst 10-year growth.

(Due to the fact Edinburgh homes were a high average of £199,585 in April 2012).

This is incredibly impressive for Edinburgh, but there’s a caveat – the entry price.

Edinburgh accesses its high returns for a high entry price – the second-highest out of the cities listed.

The fact is everyone would invest in places like Edinburgh and London if they had the funds available, but not many do.

So, what’s the bottom line?

While the high price tag for buy-to-let property in Edinburgh may not be the most inviting for first-time buyers, property investors with the cash can see big growth for their Edinburgh properties.

Huge Demand for Edinburgh Property

Edinburgh property is currently generating some seriously high tenant demand in 2022.

A recent report from Edinburgh News revealed that some Edinburgh rental properties were being tenanted within a day of listing.

This has stemmed from a growing young population.

According to the World Population Review, the current population of Edinburgh is 548,206 – over 64,000 more than just 10 years ago.

Impressively, many living in the city are young.

An estimated 20% of residents are in their 20s, and a further 15% are in their 30s – the highest in Scotland.

Young people are the lifeblood of a rental market.

They’re the most likely age group to rent, which shows just how lucrative residential property investment in Edinburgh can be.

Is it any wonder that rent has increased in the city by 12.1% in the last 12 months?

High Rental Income 

While growth-focused investors can find a lot of joy in Edinburgh, there’s also room for income investors in the Scottish capital.

As of July 2022, the average rental income for Edinburgh was £1,554 PCM.

Not only is this above the national average of £1,103, but it means that Edinburgh property investors can expect to earn an average yield of 5.44%.

City/Area Average Rent (PCM) Average Rental Yield
London £3,855 8.73%
Edinburgh £1,554 5.44%
Leeds £1,525 7.90%
Manchester £1,318 7.14%
Glasgow £1,156 8.48%
Birmingham £1,104 5.94%

 

Compared to other major UK cities, Edinburgh has the second-highest level of rental income – only behind London at £3,855 PCM.

 

However, it’s important to note that Edinburgh has the worst rental yields out of the six cities mentioned in the table.

 

In fact, you can get a rent of £1,156 in Glasgow for £161,000 less than in Edinburgh.

But it should also go without saying that the returns you can expect will entirely depend on what property you buy and the tenant demand you generate.

After all:

Just because you invest in a city like London or Leeds doesn’t necessarily mean you’ll see a better return than Edinburgh, and vice versa.

Massive Employment Hub With a Strong Economy 

So, why is the population of Edinburgh rising so high AND so quickly?

The city has an impressive knack for attracting young professionals thanks to its massive employment sector.

Edinburgh has the lowest unemployment rate in the UK, with an economy that’s grown 12.5% over the last decade.

The Scottish capital is a leader in data science, robotics, and stem-cell research, with an incredible knowledge-based economy that sees graduates make up 50% of workers.

And if that wasn’t enough to get you interested, the city has the highest gross disposable income per person outside of London.

This is while the cost of living is 30.60% lower in Edinburgh than in London, according to Numbeo.

Edinburgh’s incredible business scene means investors can enjoy just as much success with commercial property investment in Edinburgh as buying a residential property.

Growing Student Population 

Alongside a top investment with residential and commercial rental property, investors also have the choice of student property investment in Edinburgh.

A major part of the city’s young population, student numbers are soaring in Edinburgh.

As of 2022, there are over 43,000 undergraduates and 17,000 postgraduates in the region.

Want to know the best part?

Edinburgh has the UK’s highest graduate retention rate, creating a constant influx of young professionals in the city.

If you’ve never considered making a student property investment before, then it could be time to do so.

While not offering high capital growth, student investment property in Edinburgh is more affordable than residential homes while offering higher rental yields.

There are two main ways to buy student investment property in Edinburgh:

  1. You can make an HMO property investment in Edinburgh.
  2. You can buy purpose-built student accommodation.

There’s no outright winner here, but PBSA tends to be the favoured choice in recent years.

Students are now more likely to opt for better-quality apartments that older HMOs can’t provide.

A student investment property in Edinburgh could be the perfect way to expand your property portfolio in 2023.

Property Investment Guide 2023

Edinburgh Property Market Forecast 2022-2026 

So, what’s in store for Edinburgh?

While we don’t have a crystal ball to predict what the future holds, there are some exciting estimations for the near future of the Edinburgh property market.

According to the latest JLL UK Residential Market Forecast, Edinburgh will see the second-highest house price growth out of the UK’s major cities.

In 2022, Edinburgh prices are predicted to rise by 6%, with a 5.5% hike anticipated for 2023.

Over the next five years, Edinburgh will record a cumulative house price growth of 26%, with an annual average rise of 4.8% from 2022 to 2026 – higher than Manchester, Leeds, Liverpool, and London.

There’s similarly impressive growth predicted for rental income.

A 3.5% value rise is expected in 2022 and an average yearly increase of 3% between 2022 and 2026 – also higher than Manchester, Leeds, Liverpool and London.

You might be wondering:

Why so much growth?

JLL cites that this huge growth is because of low property supply, with Scotland’s new local plan restricting new houses.

As a result, demand is outstripping supply in the Scottish city, prompting considerable growth.

Looking for more information on why you should invest in Edinburgh? Check our our guide.

Where Should I Buy in Edinburgh? 

Want to know the best areas to buy property in Edinburgh?

This is the section for you.

Below we’ve done the hard work for you and worked out the latest rental yields for EVERY Edinburgh postcode.

Based on this research, the top five best areas to invest in Edinburgh are:

  • EH28
  • EH11
  • EH2
  • EH48
  • EH8

EH28 

Average House Price in EH28: £241,620 

Average Rental Yield in EH28: 6.75% 

According to the data, the best place to make an Edinburgh property investment in 2022 is EH28.

The EH28 postcode covers the villages of Newbridge and Ratho and offers an average price of £241,620.

Although rental income is below other spots in Edinburgh, at £1,360 PCM, yields are decent at 6.75% – the highest out of every postcode in the region.

EH11 

Average House Price in EH11: £221,179 

Average Rental Yield in EH11: 6.70% 

The second best hotspot in the Edinburgh market is EH11.

Like EH28, house prices are affordable at £221,179.

Although rent is (again) below the city average at £1,235, the low house prices mean you can expect returns of 6.70%.

E11 covers a small corridor along the A71 and goes through Gorgie, Stenhouse, Sighthill, and the Calders.

EH2 

Average House Price in EH2: £446,681 

Average Rental Yield in EH2: 6.02% 

Although still a popular spot for residential property, investors could enjoy commercial property investment in this Edinburgh postcode.

The EH2 postcode covers the thriving New Town and the main commercial area of Edinburgh.

Including the prominent Princes Street, EH2 has high prices at over £446,000.

Yet returns are still strong thanks to a massive monthly income of £2,239 – the highest in Edinburgh.

EH48

Average House Price in EH48: £181,042 

Average Rental Yield in EH48: 5.92% 

Not actually found inside the city of Edinburgh, EH48 covers the towns of Armadale and Bathgate in West Lothian.

EH48 can’t compete with other postcodes’ capital growth and rental demand.

However, there’s no denying that rental potential is still good, with yields of 5.92%.

This is mainly because of the low house prices of £181,042, with income at a reasonably low £893 PCM on average.

EH8 

Average House Price in EH8: £254,918

Average Rental Yield in EH8: 5.79% 

Finishing the top five list of Edinburgh’s best postcodes is EH8.

EH8 is mainly found in the south of Edinburgh and covers the inner city Southside, Newington, and Canongate.

Prices are below the city-wide average here, but income is lower at £1,231, resulting in decent returns of 5.79%.

Other Areas to Consider for Property Investment Edinburgh in 2023

While not every area generates the best average yields, they can still be an effective spot for property investment.

With this in mind, here are three more areas that are incredibly popular amongst Edinburgh residents but may not have the best stats on the surface:

  1. Stockbridge: Stockbridge is a village widely considered one of the best places to live in Scotland.
  2. Leith: Leith can be a great investment in Edinburgh. The area was voted one of the coolest places to live globally, with a large population of young professionals attracted to popular amenities.
  3. Edinburgh city centre: Edinburgh city centre is widely considered the best place to invest in the city thanks to huge investment opportunities for student, residential, and commercial property.

Property Investment Edinburgh FAQs 

What Are the Risks of Investing in the Edinburgh Property Market?

Like every investment, property can be risky.

The main risk will be void periods when your property is earning no money.

Void periods can be a nightmare for investors as you could be left to foot the bills, such as mortgage payments.

Unfortunately, there’s no way to avoid void periods. The Private Residential Tenancy rules allow tenants to give 28 days’ notice, making forward-planning harder.

Your best bet is to make your property as appealing as possible to potential tenants so you can find an alternative quickly if one leaves.

Research from Benham and Reeves found that post-covid, the three most essential facilities for tenants in rental property are:

  •         Fast broadband.
  •         Access to outside space.
  •         Property that is close to a park or outside green space.

Meeting all these criteria will improve your chances of finding (and keeping) tenants.

Should I Use a Property Management Company?

You might want to consider using a property management company if you have a full-time job.

Being a landlord can be difficult as you’ll have plenty of responsibilities when renting out a property.

Property management companies can help you have a completely hands-off investment.

They’ll handle all landlord responsibilities for a fee (usually 10% of your monthly rental income).

By doing this, you’ll be able to earn a completely passive income without worrying about managing the property yourself.

What Are the Costs of Buying Investment Property Edinburgh?

Costs for buying property can be split into three categories: Upfront costs, ongoing costs, and exit costs (when you sell your property).

Upfront costs:

  • Deposit for a buy-to-let mortgage (usually 25% of the purchase price of the property)
  • Land and Buildings Transaction Tax (Scotland’s version of Stamp Duty, but has different tax bands and rates).
  • Legal fees
  • Land Registry fees

Ongoing costs:

  • Mortgage interest payments
  • Ground rent
  • Property management fees
  • Landlord insurance
  • Maintenance/repair costs

Exit costs:

  • Capital gains tax
  • Legal fees
  • Estate agent fees

This isn’t an exhaustive list but is a good starting point to consider for your budget to see if you can afford to buy investment property in Edinburgh.

View our complete Edinburgh property guide for more information.

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Why Invest In Edinburgh In 2023

Invest in Edinburgh for its strong property market, stable rental demand, and thriving tourism industry, making it an attractive and rewarding investment opportunity.