Proper North: Buy-to-Let in Inverness and the Highlands

This month’s area spotlight is looking north, properly north in terms of the UK. We’re going to focus on Inverness and the broader highlands, where cows are iconic, monsters are found in lochs and anyone else from the UK is a ‘southerner’.

Nestling amidst the Scottish Highlands, far removed from the hustle and bustle of the central lowlands, it may seem like an unlikely place to look for buy-to-let opportunities. However, they are there if you know where to look.

So, as experienced buy-to-let professionals, we’re going to offer you an overview of the delights and potential pitfalls of investing in buy-to-let in Inverness and the highlands.

Sunny Inversneckie (or just Sneckie, or Inverness!)

Also known as the ‘Capital of the Highlands’, Inverness is the most northern city in the United Kingdom.

As cities go, Inverness is not large, covering some 26.6 km²; one-tenth of that occupied by Edinburgh and just over half the area of Loch Ness. Its population in 2023 was 46,984, slightly down from the 2021 high of 47,820.

In contrast, the population of Loch Ness is reckoned to be just one – the Highlands are sparsely populated.

That said, one quarter of the population of the Scottish highlands live in or near Inverness, making it a vital hub. It also rates very highly, at 5th out of 189 British cities, for quality of life.

Once a home to traditional Scottish industries, especially whisky distilling, more recently Inverness has become home to a number of technology and life science companies, and in the 2000s had one of the fastest growing economies in the UK.

It’s also a university city, home to some 6,500 students, many of whom rely on private landlords to provide them with accommodation. Along with the Highlands more broadly, it is steeped in history – Culloden is just along the road.

Like many areas in Scotland, Inverness and the Highlands have seen a surge in short-term-lets (AirBnB and other holiday lets) and this has caused problems for those seeking long term rented accommodation.

We’ll take a look at how the Highlands Council tried to deal with this shortly.

Buy-to-let in Inverness and surrounds

Despite its relative remoteness, Inverness has a thriving economy, increasingly based around new technologies. This in turn creates demand for accommodation that is not solely based on holiday lets.

Average property price in Inverness was £221,763, which was a 4% increase compared to the previous year. You can expect average monthly rents to range from £631 for a one bedroom property to around £1,050 for three bedrooms.

Although house prices are slightly lower than the Scottish average of £224,504, rents are on a par with those outside Edinburgh and Glasgow, and yields, in the right areas of the city, are rewarding.

Locally, property prices vary from circa £110,000 for one bedroom, up to around £437,000 for a five bed property. Drawing comparisons with central Scotland is probably not helpful, Inverness is the only major conurbation in the region.

Therefore choices for those seeking accommodation of any kind are more restricted which tends to pressurise the local market. There are surrounding villages and small towns which are within commuting distance and therefore worthy of consideration.

These pressures on affordable housing caused Highland Council to launch a scheme in 2022 to buy properties at market value in order to boost their stocks of available housing.

While the council accepted that seller’s could make more on the open market, they hoped that their ‘hearts and minds’ approach would persuade sellers to strike deals with them.

As an added sweetener there would be no requirement to obtain a Home Report and the seller would not need the services of an estate agent, potentially a considerable saving. 

This scheme also aimed to reduce second homes being bought as short-term lets (STL), which decreased the number of potential long-term lets available. With the STL licensing scheme also in operation, time will tell which proves more effective.

It’s entirely understandable that a region as beautiful as the Highlands would attract considerable STL investment, but there is a balance to be struck given the need for longer-term accommodation for those living and working there.

Advice from the property pros

When looking at buy-to-let in Inverness as a potential investment, once you accept its geographical distance, the market itself is no different to other parts of the UK.

Locations like Inverness, and its surrounding towns and villages can sometimes be a bit of an outlier, existing within their own economic climate, however property in the city appears to be running largely in sync with the broader market.

While its population has contracted slightly, the overall economic outlook is healthy and that bodes well for those looking to make a medium-to-long term investment in BTL property.

This view is firmly in accordance with the activities of Highland’s Council who might currently be viewed as competition for available properties, not a situation investors encounter often.

All of this indicates a strong market with no lack of demand for good quality rental accommodation, as the local paper, The Press & Journal has commented recently.

Quite apart from the sound economic considerations, if you are investing in property as a route to obtaining a retirement property, rather than a lump sum for a pension, Inverness is one of the nicest places to find yourself.

In summary…

Here at Portolio we talk about strategy quite a lot, and for good reason! When looking at buy-to-let in Inverness and the Highlands, it ticks a couple of boxes for many investors.

It’s a surprisingly vibrant area in terms of economic growth and its drive to embrace and attract new industries. That drives a need for good quality rental properties and that in turn offers solid investment returns.

Written by Ross MacDonald, Director of Sales & Cofounder of Portolio

Get in touch on 07388 361 564 or email to [email protected]