Edinburgh leads UK for house price and rental growth but ‘viability gap’ widens

Average prices of new-build apartments in the Scottish capital rose by 6.1 per cent over the past year, while rents increased by 3.6 per cent, the latest study by global property advisor JLL has revealed.

The findings from the firm’s Big Six Residential Development Report, which tracks Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester, found that the number of homes available to let was 49 per cent lower in July than a year earlier.

That limited supply and “sustained tenant demand” are said to be supporting rents across Scotland’s two largest markets.

Rents for new-build apartments rose by 3.6 per cent, year-on-year, in Edinburgh and 2.7 per cent in Glasgow, compared with average growth of 1.8 per cent across the big six cities.

Edinburgh also recorded the strongest annual price growth across the six locations, while prices for new-build apartments in Glasgow rose by 2 per cent. JLL said the performance of both cities reflected resilient demand and a shortage of new supply.

The firm has subsequently upgraded its outlook for the wider UK rental market, forecasting rents will rise 3.5 per cent in 2026, up from its previous guidance of 2.5 per cent.

It also warned that a shortage of new homes was continuing to support prices and rents across Edinburgh and Glasgow, despite renewed investor interest in Scotland’s build-to-rent market.

Jason Hogg, director, head of UK regional land at JLL, said: “Edinburgh and Glasgow continue to demonstrate the impact of strong demand meeting limited supply. Both cities have recorded resilient price and rental growth, while a shortage of new homes is maintaining pressure across the market.

“There are some clear advantages to developing in Scotland - a new housing bill, a clearer regulatory environment and two fantastic cities, each with their own individual stories to tell. However, the viability gap remains too wide and, without some form of support, there’s a real chance it will widen.

“We need some brave and imaginative solutions to support development in Edinburgh and Glasgow if we are to see the next wave of development take place. Without it the demand for housing and the pressure on rental growth will continue.”

Meg Eglington, UK residential research associate at JLL, said: “Rental markets across our big six cities have become noticeably tighter over the past year. Tenant activity has been strong, and available homes are being absorbed quickly, but so far that hasn’t translated into significant rental growth because markets entered the year with relatively elevated levels of stock.

“The important question is what happens next. If demand remains at its current level while availability continues to fall, there will be considerably more scope for that pressure to feed through into rents during the second half of the year.

“Ultimately, this comes back to supply. Viability constraints remain the biggest challenge to housing delivery, nationally and across our big six markets. Higher financing and construction costs are making it difficult to bring forward new homes, while regulation creates further challenges in parts of the market.”