On the eastern periphery of Edinburgh’s Old Town is Arthur’s Seat, a rocky mound that was once an active volcano. The only risk of eruption these days comes from the city’s property market, in which house prices increased 10.2 per cent on average in the year to December 2017, according to estate agents Savills.
That put the city among the fastest-growing markets in the UK and far ahead of London, where prices edged up 2.5 per cent in the same period. Burgeoning demand has been a key factor in the price growth. Between 2011 and 2016, the city’s population swelled by almost 25,000, according to National Records of Scotland (NRS) migration data, a significant gain for a city of 500,000 people.
Most migrants to the city are drawn by education, employment, quality of life and affordability, according to Ben Fox, head of residential in Savills’ Edinburgh office. “It’s relatively cheap and ranks highly in terms of being a place where people want to live. You can live anywhere within the city and be within 20-30 minutes of your workplace,” he says.
The city attracts interest from “abroad, the south and elsewhere in Scotland”, according to Fox, who adds that most buyers have a “Scottish connection”.
As well a substantial financial services sector, the city hosts a growing tech scene. Video games developer Rockstar North and travel website Skyscanner were both founded here, and tech incubators are popping up all over the city, says Fox.
Employers are drawn by relatively affordable office and labour costs — the salary of a software engineer in Edinburgh is a third lower than in San Francisco, reckons Savills — but also by the University of Edinburgh. More than 40 per cent of its graduates opt to remain in the city after completing their studies, according to the Centre for Cities, a think-tank.
As demand outstrips supply, however, living in the city is becoming more expensive. The average house price hit a record high of almost £285,000 last December, according to Savills, and housebuilders have not been able to keep pace with the new arrivals.
The City of Edinburgh and five neighbouring local authorities set a target of 22,300 new homes for the city between 2009 and next year, but they are anticipate “a shortfall in the effective housing supply to 2019 and potential ongoing difficulties in maintaining a five-year land supply”.
As a result, migration to Edinburgh’s neighbouring regions is increasing. More than 23,000 people moved from Edinburgh to the Lothians — the region that rings the city — between 2011 and 2016, with just over 13,000 going the other way, according to NRS data.
More may follow. Property consultancy JLL predicts prices in Edinburgh will continue to rise — by as much as 22 per cent by 2022, further stretching affordability.
The potential for strong capital growth is likely to tempt investment buyers. Although the cooling of London’s market is yet to drive a mass exodus of buyers to Scotland, says Fox, Edinburgh is “very much on the map from a general investment perspective”. The proportion of property sold to buyers from outside the city has increased from around a third five years ago to over 40 per cent today, he adds.
On a recent transaction, says Fox, the two top offers came from people living in or just outside London, both motivated by affordability. “In Edinburgh, you can buy a house reasonably centrally, with good proportions, for the price of a two-bedroom flat in Fulham, west London.”
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