December 19, 2024
Full article“The properties aren’t always so posh but you can get a good return if you swap Edinburgh investments for Dundee.”
Dundee is undergoing huge transformation. The arrival of the V&A nearly six years ago, infrastructure upgrades, the construction of a new e-sports arena, and the development of the Eden Project along the city’s waterfront are just some of the reasons the city has picked up a range of recent accolades, including being one of the best places to live in Scotland.
Add to that a growing local economy, two universities with globally recognised expertise in their respective specialisms, as well as thriving life sciences, biotech, and gaming sectors and it’s clear to see why people are getting excited about Dundee.
The city is increasingly standing out as a great opportunity for investment and is coming up much more often in the conversations we have with landlords. In fact, we have had a number recently decide to sell assets elsewhere – particularly Edinburgh – to invest in Dundee’s property market.
Part of the reason for that is changes in the Scottish capital, where new legislation – such as the proposed regime around short-term lettings – is creating challenges for people with buy-to-let properties. However, it is mostly because of the attractiveness of Dundee, beginning with its comparatively low barrier to entry.
While the average house price across all sizes in Edinburgh is £335,598 according to Rightmove, in Dundee it is £174,726. A one-bedroom flat in the capital might set you back around £200,000, but in Tayside you can find a similar property for around one-quarter to one-third of the price – a much more reachable target for first-time landlords or those looking to invest in multiple properties.
Dundee may not offer the same level of capital growth, but the yields that can be realistically achieved are generally significantly higher. Average rents for a one-bedroom flat sat at £593 per month during the first quarter of 2023, according to Citylets data – a yield of around 11% on a £65,000 property. Rental yields of 6% to 7.5% are more typical in Edinburgh – albeit, it depends on the area of the city.
Rental growth is also strong in Dundee. Compared to Q1 last year, one-bedroom flats saw rents rise 14.5%, the highest annual increase for properties with one to three bedrooms across Scotland’s four largest cities. Dundee also leads for rental growth on one-bedroom properties over five years.
Like any market, there are cons to consider, as well as the pros. Broadly speaking, the quality of the properties available for buy-to-let purposes in Dundee is often lower than what can be found in Edinburgh today. Some might be comparable with the flats that were quite typical a few years ago in areas like Gorgie and Dalry, for comparison purposes, which have since been upgraded and are, consequently, now more expensive.
With that may come the need to undertake refurbishment work, commission roof repairs, or carry out other work to bring the property up to the required standard – which obviously comes with a level of upfront expenditure. This will need to be factored into any investment and reflected in your yield expectations.
Nevertheless, Dundee is undoubtedly an up-and-coming market. We have said before that we believe it can become Scotland’s ‘buy-to-let capital’, with so many factors working in its favour. And, as a result, we believe the trend of landlords swapping the Scottish capital for the City of Discovery is only going to continue for the remainder of this year and into the future.
