Edinburgh beats London property

One of the biggest attractions Edinburgh property holds for investors are reasonable property prices, allowing relatively easy access to a good choice of high quality flats or houses. In fact, many of our investor clients tell us that -  apart from average net rental yields above 7% - it's this accessibility that attracts them to the Scottish capital.

Their alternative? London has continuously shown high demand for rental property, both from tenants as well as investors. However, in many cases the rental yields don't match Edinburgh's and the amount of cash required to invest has certainly made buyers think twice.

Research from estate agents Knight Frank is now backing up our anecdotal evidence that investors are starting to think twice about spending their money on London property as 'buyers are becoming more resistant to continued price rises'.

Whilst buyer interest is still growing slightly, it has certainly slowed down at the top end of the market, for properties worth more than £5 million. At the same time, rents for prime central properties have fallen slightly, by 1% since the start of this year.

By comparison, Edinburgh rents have remained stable or grown, depending on the size and location of the individual property. For a better idea of Edinburgh investment opportunities, click here, or contact us directly.

Asking prices, mortgage lending and availability - all on the up

It's been a flurry of good (property) news on the Property Reporter website today. It's more than enough to give you a bit of a round-up here and all down to increase confidence in the property market.

Asking prices for properties for sale are becoming more steady, with less of them being dropped by sellers looking to move a flat or house. In fact, Edinburgh showed the second-lowest proportion (after London) of discounted properties in the UK with only 27.7% of properties for sale having their price dropped. This is compared to a much higher national average of 32%, which fell from 37% last year. On average, property prices are being reduced by just over 6%, down from 7.6% last August.

Altogether, the trend is pointing towards a growing confidence in sellers, who appear to be happy to wait for the right buyer to come along and pay a price they are happy with.

At the same time, things are starting to look up for first time buyers as gross mortgage lending hits nearly a five year high at an estimated £16.6 billion in July, a 29% on last year. In fact, it is the highest estimate the Council of Mortgage Lenders (CML) has published since October 2008. According to the CML, the increased lending activity is down to stronger housing and mortgage markets as well as falling interest rates on fixed rates due to the Funding for Lending scheme.

Having said that, those looking for a mortgage also have a lot more choice than they would have had even a year ago. Last month, more than 10,000 mortgage products were available to consumers, the highest number since September 2010. The typical home buyer borrowed just under £160,000, a slightly increased loan to income ratio.

In our opinion, all three of these stories reflect a growing upwards trend in the property market. For those looking to invest, this is a great time with plenty of choice of mortgage products available and property prices still stable. At the same time, despite the number of mortgage products increasing, many still require a sizeable deposit which will keep a large proportion of people in the rental market for years to come.

Low interest rates for 3 years, but is now the time to buy?

The Bank of England’s (BoE) new Governor, Mark Carney, has announced his first ‘forward guidance’, saying that the Bank ‘will not even think of raising interest rates’ until UK unemployment drops below 7%. The rate is currently 7.8%. The BoE envisages that this will take about three years to achieve.

For potential property investors this means three years of financial stability, making residential property once more a low-risk investment. Add to this the net rental yields investors and landlords can currently achieve – on average around 8% on Edinburgh student rentals – and it’s easy to see why we have seen more interest and commitment from investors in the past six months than we have in years.

Looking at Cullen Property’s investor clients, shows of interest have increased markedly and we have purchased more than £1.1 million worth of residential property in the last month alone.

There’s no decent investment without risk, I hear you say. And what happens if the interest rate goes up sooner than envisaged by the BoE? After all, the bank did include a few ‘get out’ clauses in its guidance, as discussed in today’s Scotsman newspaper.

Whilst the BoE may interest rates sooner, Carney has made it clear that this would only be the case if the UK’s GDP increases and inflation rises. In other words, the economy would have to be doing better, thus allowing for unemployment rates to drop at the same time.

If that were to happen, not only would investors see their interest rates go up, but the rents achieved by their properties would follow.  It is also likely that the housing market would be improving along with the wider economy, bringing with it capital growth.  A win-win situation.