Switch from short-term to long-term lets in Edinburgh
Landlord advice: Long-term lets are basic necessities. Holiday lets are not.
COVID-19, in just a few weeks, drastically reduced demand for holidays lets and Airbnb-type of services in Edinburgh, in particular, and in Scotland, in general. Some holiday lets can be used by NHS staff transferred to fight the virus in hotspots (bigger cities like Edinburgh), but it will never replace the demand of around 4 million international visitors (2016 data).
When demand drops, prices follow: On 27.03.2020, there were dozens of beautiful Edinburgh properties available on Airbnb with prices starting at £22 per night. This amounts to £660 per month, if fully booked – including all utilities, council tax and fees.
Last week, we were approached by a landlord with around 10 holiday let properties – which were suddenly all empty. Many other investors in short-term let properties face a similar dilemma: stick to short-term lets a while longer, or switch to long-term lettings. In our opinion, long-term lets are a much safer bet these days
Coronavirus will not go away soon
Even if restrictions are lifted in early April, it will not mean that life will come back to normal – unless it is a ‘new normal’. COVID-19 and its threat will be with us until either a successful mass vaccination programme is instigated, or social herd immunity is acquired naturally (i.e. most of us contracting COVID-19 and gaining some immunity). There will be some travel restrictions from current hotspots of the pandemic. Tourists may be hesitant to travel abroad or use planes for many months to come. The virus may flare up again, as it did in Hong Kong. It creates lot of uncertainty for businesses reliant on international tourists.
If the epidemic persists in Scotland until July, The Edinburgh Fridge may well be cancelled (or ‘rolled over’ to 2021). Holiday lets are a seasonal business: most income is made between June and September. Even if all restrictions are lifted, we can safely assume that Edinburgh will attract less tourists in Summer 2020, than in 2019.
Licensing scheme for holiday lets
In January 2020, the Scottish government decided to empower councils to introduce licensing schemes for short-term lets. The Edinburgh Council welcomed the announcement. It means that from spring 2021, there will be a licensing scheme for holiday lets – and such properties will have to meet certain safety requirements. It can go both ways – either towards regular rental compliance, which is relatively straightforward – but what if the new requirements will be influenced by HMO standards? There was also a Scottish Government consultation on ‘tourist tax‘ which will certainly not make running a short- term let business cheaper.
Rising rents in Edinburgh
Although the rents have been rising year after year in Edinburgh (by 46% for 2 bedroom properties between 2010 and 2010), we expect the coronavirus crisis to have some impact on long-term lets as well, but it will not be nearly as severe as on Airbnb-type of lets. The worst-case scenario, as far as residential lettings is concerned, is slightly decreased demand for flats (fewer international students) and increased ratio of rent arrears (as some tenants will have lost their jobs). Luckily, the government has now provided a safety-net for tenants: 80% of salary paid by the state, although some renters may have to temporarily resort to housing benefit and universal credit.
Landlords whose tenants are unable to pay their rents may ask their banks for a mortgage holiday. In the end, people will need to live somewhere – but they don’t really have to travel abroad and use short-term lets. Having a roof over our head is a basic necessity. Booking a trip abroad is not.
Wavering short-term let Edinburgh landlords
If you are a short-term landlord considering long-term lets, feel free to contact us by phone or email. We can provide you with a software property valuation; a desktop valuation based on historical letting records or do a video link valuation of your property. While we temporarily limit face-to-face contacts, landlord agreements can be signed online. All tenant-side activities are carried out remotely: we do 3D online viewings; use a third party online referencing provider; create PDF inventories and sign tenancy agreements online, via Signable. We have been prepared to work remotely and remain open for business – so please get in touch with us if you need a long-term rental advice.
