How house prices have changed in Edinburgh over the last two
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House prices in Edinburgh have increased significantly over the last decade or so. However, over the last two years the rate of increase has slowed down. There are a range of factors that impact the rate at which house prices change in Edinburgh all of which need to be taken into consideration when analysing the market and predicting what will happen to house prices in the city over the next five years or so.
The numbers: What has happened to house prices in Edinburgh?
Houser prices in Edinburgh have increased relatively slowly in recent years. Over the last two years, prices have risen by only 3% according to Zoopla.com, a leading property portal. Over the last five years, the rate of increase has been only 20%. This compares to 30% in London and almost 35% in Manchester, one of the UK's fastest growing cities.
This is a notable slowdown for Edinburgh, which saw some of the UK's fastest housing growth in the early 2000s. Some have blamed this slowdown on the Edinburgh Trams project, which created major disruption in key areas of Edinburgh city centre and the west end whilst it was being built. However, construction was finished over three years ago and house prices are yet to see a resurgence, despite the relative popularity of the system.
It is likely that the slowdown has more to do with a general slowdown in Edinburgh's growth. The cities creative and retail sectors grew enormously at the start of the 21st Century, catching up to Glasgow where much of this growth had been concentrated throughout the early 1990s. After catching up, Edinburgh has struggled to move further ahead. There are however a number of projects in the pipeline which are designed to kickstart the city's growth again.
Where is the growth concentrated?
Major new building projects in Edinburgh have been relatively few and far between. The enormous Quartermile development, located on the former Royal Infirmary site has taken over a decade to come to fruition. A number of new flats have been built but much of the site remains undeveloped. There has also been a slowing of the rate of development in Leith, where many new developments took place at the start of the 21st Century.
The has been an increase of development of family homes towards the West of the city. The trams have unlocked new areas of development around Murrayfield which is now an easy 20 minute commute from Princes Street on the popular tram system. This has led to an interesting split in property prices outside the city centre. Flat prices remain high as supply has been relatively constrained, whereas the price of family homes outside of the most popular areas is now closer to that seen across the rest of Scotland.
The student factor
Edinburgh is one of the UK's most popular student cities and all of these students have a major impact on the housing market. The most popular student areas are the tenement developments to the south of the Meadows. Most of the flats here contain three to five bedrooms and are perfect for the student population. Many landlords also choose to 'double dip' by renting out the same flats to performers and visitors during the city's popular Festival season in August. Demand for accommodation is incredibly high at this time of year and rent yields can be exceptionally high. The Festival does cause some areas of the city to grind to a halt however and can make commuting particularly difficult in some parts.
What does the future hold?
scotland has seen a high level of political uncertainty over the last three years and that is likely to continue. In the run-up to the independence referendum, it was not clear if Scotland was about to face one of the largest economic upheavals in its history. Now, a year after the referendum on leaving the European Union, it remains unclear what any final deal will look like if there is one at all. Edinburgh's heavy reliance on the financial services industry makes it more exposed to any negative impact from Brexit that most of the rest of Scotland. If the city's financial services institutions choose to leave or decide to scale back their growth plans then house prices are likely to take a significant hit.
Property owners, landlords and tenants also need to consider the potential impact of any more general economic issues. The UK has not seen a recession since 2012 - general economic patterns would suggest that there may be one on the way in the next couple of years which could lead to a temporary drop or correction in house prices in Edinburgh. However, house prices in the city have not grown particularly in the last few years so there is less of a high cliff for the prices to drop off.
Predicting the future of property prices in any UK city can be very difficult and Edinburgh is no different. There are many factors which have to be taken into account and there is always the possibility that an unknown or unexpected factor could arise that will cause a major increase or decrease in property prices in the Scottish capital.