By Simon Hemelryk

Property hotspot: Edinburgh

In the latest of our series profiling the cities that may be great investments for landlords, we focus on the Scottish capital.

With its striking castle, historic city centre, famous arts festivals and thriving service industry, Edinburgh is a popular tourist destination and a very desirable place to live.

Moneymaking potential

Edinburgh has been an important banking hub for centuries. Currently, it has the biggest finance sector in the UK after London, employing more than 30,000 people. It’s an appealing place for young finance professionals to be based, according to Jonathan Gordon, MD of local letting agent Clan Gordon, because, he says: “Unlike London, they can live in lovely, affordable locations and walk to the office.”

The city has a burgeoning fintech sector, too, says Mike Wilson of employee benefits service Lightbox Reward, which was founded in Edinburgh in 2015. Firms such as Money Dashboard and investment platform FNZ have grown by working with the existing banking and insurance companies and making use of a big local talent pool.

There are also an increasing number of biotech firms, such as NuCana and EM Imaging, as well as other technology companies including multibillion travel comparison website Skyscanner.

“The financial industry means that Edinburgh attracts a lot of new enterprise,” says Malcolm Pickard, divisional director at Tay Letting. “Anywhere there’s money, there’s money to be made.”

Edinburgh’s population of just over 510,00 is projected to grow almost 8% between 2016 and 2026 – with new employment opportunities are a big factor.

City of culture

The Fringe and International Festival – probably the biggest comedy and arts events in the world – are a major part of why Edinburgh and the Lothian region as a whole attract around 4.2 million overnight visitors a year. It also helps the city maintain a strong cultural and leisure offering all year round, appealing to young, well-educated potential new residents.

“The Festival and Playhouse theatres attract most of the big tours,” notes John Blackwood, CEO of the Scottish Association of Landlords (SAL), who has several properties across the city. Other highlights of the cultural calendar include the Jazz & Blues and International Book Festivals, the Scottish National Gallery of Modern Art and Edinburgh’s spectacular Hogmanay celebrations – billed as the “world’s best street party”.

Joanna Allen, integration specialist at Aberdeen Standard Investments, lives in the centre of the city, and says: “I can get tickets to a Matthew Bourne ballet here, relatively easily, whereas in London, I’d be fighting people for them.”

As well as an impressive cultural calendar, Edinburgh’s city centre can boast of having more restaurants per head than anywhere else in the UK, including four Michelin-starred establishments.

“Things really benefit from all the tourists, and Europeans [working] here,” says Hamish Mitchell, non-executive director of Coulters Lettings.

Meanwhile, the city centre boasts a thriving shopping scene with a mix of high-end retailers and quirky, niche shops.

History, architecture and the great outdoors

It may be a busy capital city, but Edinburgh is a beautiful and leafy place to be, with plenty of green spaces.

The extinct volcano Arthur’s Seat looms above the 650-acre Holyrood Park, the Meadows hosts numerous public events and, says Joanna Allen: “The Royal Botanic Gardens are stunning and change throughout the year.”

The city centre is just minutes from the Firth of Forth and the great landmark of the Forth Railway Bridge, which links the north east and south east of Scotland. “This makes it feel airy and fresh,” says landlord Alex Mackie, who lets six properties locally.

Edinburgh Castle dominates the skyline of the city centre, and the streets below are a mix of iconic grey-brick Georgian townhouses and abstract architectural wonders, like the Scottish parliament building.

“The buildings give the place a sense of being a quality place to live,” says Rachel Wilson, a geologist who lives in the South Queensferry suburb on the Firth of Forth.

Student focused

With four acclaimed universities, including Heriot-Watt and the University of Edinburgh, the city has more than 60,000 students – a population that’s growing.

According to Jonathan Gordon, many students live in HMOs in tenement buildings in areas such as Newington, where prices start at about £400 a month per room. More upmarket areas include Marchmont, where Gordon says average rents are £600-plus, and new, secure city centre developments such as Quartermile, which are popular with wealthy overseas students.

New and improved

The revamped £1bn St James Centre in Edinburgh’s east end will feature upmarket apartments, offices and 850,000 square feet of retail space when completed in 2021. A new tram service will link it to the old docks at Granton, where a new marina, shops, cafes, and retirement and residential buildings are under construction.

“The suburbs between these two points, such as Leith, have been some of the poorest in Edinburgh but are now a great place to invest,” says Gordon.

A major commercial development at a long-neglected site at Haymarket will also boost nearby Dalry, a previously down-at-heel area that is already benefiting from recent investments in public spaces and housing stock.

Transport hub

The M8 and M9 link Edinburgh to Glasgow and northern Scotland, while there are regular fast train services to England. Edinburgh Airport has direct services to Europe, the US, Canada, and China.

Prime areas

Five of the best postcodes in Scotland through which to achieve a high rental yield are in Edinburgh, according to Totally Money’s Buy-To-Let Rental Yield Map 2018/19. They are:

EH11: Dalry

This area features numerous traditional tenements and is increasingly popular with young professionals.

Average rent: £1,009

Average asking price: £182,399

Average yield: 6.64%

EH3: city centre

The centre boasts smart tenements, Georgian townhouses and modern apartments popular with professionals, and workers and MSPs from the nearby Scottish parliament.

Average rent: £1,923

Average asking price: £373,004

Average yield: 6.19%

EH6: Leith

Leith features older houses and flats and new-builds in working class and redeveloped industrial areas.

Average rent: £1,060

Average asking price: £204,295

Average yield: 6.23%

EH7: Easter Road and Meadowbank

This area primarily attracts a blue-collar population in old and modern flats, with considerable investment being made in public spaces.

Average rent: £1,197

Average asking price: £238,446

Average yield: 6.02%

EH8: Newington

This is a popular student area, close to the University of Edinburgh.

Average rent: £1,245

Average asking price: £249,304

Average yield: 5.99%

According to Tom Mitchell, an investment analyst at One Touch Property, house prices in Edinburgh could rise 16.7% by 2023. Average yield will increase from 6% to 8%, outstripping most areas of the country.

Recent Scottish regulations removing fixed-term tenancies may impact rental values and landlords’ costs – though it’s too early to be sure how widespread an issue this will be, says John Blackwood from the SAL.