Is buying an Airbnb in Old Town still worth it?

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Is Edinburgh Old Town Airbnb demand still strong right now?

Edinburgh Old Town Airbnb demand is still very strong right now, and tourism is one of the few parts of this investment case we do not worry much about.

AirDNA’s latest completed-market data puts Edinburgh at 68% short-term-rental occupancy, with an average daily rate of $268 and RevPAR of $183. The city also scores 93 out of 100 for rental demand in AirDNA’s current market assessment. Those figures cover the whole of Edinburgh, so they should not be treated as an Old Town underwriting model, but Old Town sits directly beside the city’s strongest visitor attractions and festival venues.

Hotels tell the same story from a completely different dataset. Colliers’ 2026 UK Hotel Development Index ranked Edinburgh first among 35 UK markets for the second year running. Hotel occupancy reached 84.6% in 2025, while average room rates climbed 3.2% to £165. Only York recorded higher occupancy among the markets Colliers tracked.

These are unusually strong numbers for a mature UK tourism city. Edinburgh hotels are filling more than four rooms out of five while charging some of the highest rates outside London, and short-term rentals are filling roughly two-thirds of the nights they actually make available.

For an Old Town Airbnb, finding visitors is still the easy part.

Edinburgh accommodation indicator	Latest reading	Recent change	What we learn
Short-term-rental occupancy	68%	-0.8 pts YoY	Demand remains high
Short-term-rental ADR	$268	-5.8% YoY	Guests are still paying high nightly prices
Short-term-rental RevPAR	$183	-6.1% YoY	Earning power has softened slightly
Hotel occupancy	84.6%	Broadly stable	Edinburgh tourism remains exceptionally busy
Hotel ADR	£165	+3.2% YoY	Hotel pricing is still rising

Is Edinburgh Airbnb revenue really booming again?

Edinburgh Airbnb revenue looks much stronger in the headline data than the underlying market actually is, so we would be careful with anyone claiming that returns have suddenly exploded.

AirDNA currently reports average annual revenue of $56,300 per active Edinburgh short-term rental, up 55.6% year over year. Taken alone, that looks extraordinary.

The other figures tell a much more interesting story. Occupancy slipped 0.8 percentage points, average daily rates fell 5.8%, and RevPAR fell 6.1%. At the same time, AirDNA’s active-listing count dropped 28.3% to 7,528.

Average revenue per active listing has therefore jumped while revenue generated per available night has fallen.

The most plausible reading is that the population of properties being counted has changed substantially. A market losing thousands of active listings can become concentrated around professionally managed, frequently available or stronger-performing properties. AirDNA itself warns that neighbourhood, bedroom count and availability need to be filtered before using its market average to value one address.

The 68% occupancy and $183 RevPAR figures are much more useful than the 55.6% revenue-growth headline. Edinburgh remains a very good short-term-rental market, but the latest data does not show a sudden demand boom.

AirDNA Edinburgh metric	Current level	YoY change	Our reading
Active listings	7,528	-28.3%	Supply universe has contracted sharply
Annual revenue per active listing	$56,300	+55.6%	Heavily affected by listing mix
Occupancy	68%	-0.8 pts	Demand broadly stable
ADR	$268	-5.8%	Pricing has softened
RevPAR	$183	-6.1%	Comparable earning power is slightly weaker

Can you still buy a normal Edinburgh Old Town flat and turn it into an Airbnb?

Turning an ordinary Edinburgh Old Town residential flat into a full-time Airbnb is now a high-risk strategy, and we would value the property as a normal flat until planning permission is actually secured.

The whole City of Edinburgh has been a short-term-let control area since September 2022. A dwelling that is not the owner’s principal home requires planning permission when its use changes to a secondary short-term let.

Old Town makes that hurdle particularly awkward because so much of its stock is made up of flats inside traditional tenements.

Edinburgh’s planning guidance pays close attention to the relationship between a short-term let and neighbouring homes. The Council asks applicants in flatted buildings to show where the property sits relative to the common stair and neighbouring flats. Shared residential stairs have repeatedly been one of the most difficult configurations because guest arrivals, departures, luggage, noise and late-night movement happen directly beside permanent residents.

A main-door property starts from a better position. Commercial surroundings can also help because there may be less conflict with neighbouring residential use. Capacity matters as well: a compact two-person visitor flat creates a different amenity issue from a property marketed to large groups.

So when we see an Old Town listing described as “ideal Airbnb potential,” we mostly ignore that sentence. The relevant evidence is planning history, lawful-use documentation and the physical configuration of the building.

A gorgeous Royal Mile tenement flat with no established short-term-let status can be a much worse Airbnb purchase than a slightly inferior property two streets away with its own entrance and approved use.

Old Town property	Airbnb planning risk	Why
Flat reached through a residential common stair	High	Guest turnover directly affects neighbours
Main-door flat	Lower	Less shared residential circulation
Small property with limited guest capacity	Lower	Lower disturbance potential
Large group-oriented flat	Higher	Greater noise and amenity concerns
Existing lawful short-term-let use	Much lower	Conversion issue has already been addressed
Historic Airbnb listing with unclear permission	High	Previous operation does not prove lawful use

Does buying an existing licensed Old Town Airbnb solve the problem?

Buying an established Edinburgh Old Town Airbnb is much safer than trying to convert a normal flat, provided we verify both its planning position and its licence instead of treating “licensed Airbnb” as a catch-all label.

Planning and licensing are separate in Edinburgh.

Planning concerns the lawful use of the property. A short-term-let licence regulates the accommodation and operator. Edinburgh Council states clearly that an operator cannot take bookings or receive guests without a licence.

The good news for buyers is that Scotland now has a licence-transfer mechanism. Current Scottish Government guidance allows the existing licence holder to apply to transfer the licence to a purchaser who wants to continue the short-term-let business. The authority consults Police Scotland, and the buyer receives whatever time remains on the existing licence.

Planning permission is usually tied to the property rather than disappearing simply because the owner changes. This is why an established short-term let can be genuinely more valuable than the ordinary residential flat next door.

We would still want the documentation before putting a value on that advantage. The seller should be able to show the planning decision or certificate supporting the current use, the short-term-let licence, its expiry date, any conditions attached to it and the process required for transfer.

The latest Scottish Government figures also show how meaningful this regulated stock has become. Edinburgh had received 7,708 validated short-term-let licence applications by the end of 2025, but only 3,209 licences or exemptions were recorded as being in operation. Another 577 valid applications were still awaiting determination.

Those numbers should not be read as a clean measure of how many Airbnbs disappeared, because applications, expiries, temporary festival permissions and operating status are different concepts. They do show that legally documented short-term-let accommodation has become a distinct part of the property market.

Is a legal Edinburgh Old Town Airbnb worth paying extra for?

A proven Old Town Airbnb can justify a price premium today, but we would only pay that premium against the extra profit the legal short-term-let use can actually produce.

ESPC currently puts the average Old Town selling price at £286,958. One-bedroom flats are the area’s most commonly sold property type, homes take a median 41 days to sell, and the average sale achieves 100.8% of Home Report valuation.

Now imagine two similar £290,000 flats. One is an ordinary residential flat. The other has established short-term-let planning status, a transferable licence route and genuine operating history.

The second property has something scarce. A buyer can enter a market where new secondary short-term-let conversions face significant planning friction.

How much should that scarcity be worth?

We would calculate the sustainable annual profit advantage over long-term renting and work backwards. Suppose an established Airbnb produces £12,000 more net operating profit each year than the same property would generate from a normal tenancy. Paying £40,000 extra may be defensible if we expect to operate for many years. Paying £120,000 extra means effectively spending ten years of that advantage upfront before considering financing, tax, refurbishment or regulatory changes.

Gross Airbnb revenue is especially dangerous here. A £50,000 revenue property does not produce a £50,000 advantage over residential letting because cleaning, management, utilities, platform costs, insurance, maintenance and empty nights consume part of the gap.

We would happily pay something for verified operating status. We would not pay whatever premium the words “Airbnb licence” allow a seller to ask.

Does Scotland’s 8% second-home tax ruin an Old Town Airbnb deal?

Scotland’s 8% Additional Dwelling Supplement now takes a serious chunk out of an Edinburgh Airbnb investor’s return before the first guest arrives.

Revenue Scotland currently charges ADS at 8% of the purchase price on most additional residential-property purchases. It sits on top of normal Land and Buildings Transaction Tax.

At Old Town’s current average selling price of roughly £287,000, ADS alone comes to nearly £23,000.

A £300,000 investment property carries £24,000 of ADS and £4,600 of normal LBTT, bringing transaction tax to £28,600. At £500,000, the combined bill reaches £63,350.

The change is easy to underestimate when looking at returns achieved by older Airbnb owners. Scotland’s ADS started at 3%, rose to 4%, then 6%, and now sits at 8%. A £300,000 investor buying under the 3% regime paid £9,000 of ADS. The same component costs £24,000 today.

That additional £15,000 generates no rent and buys no extra property.

For a cash-rich buyer holding for ten or fifteen years, the cost can still be absorbed. For someone hoping to buy, operate for three years and resell, it severely weakens the maths.

Purchase price	Normal LBTT	8% ADS	Total transaction tax	Total tax as % of price
£250,000	£2,100	£20,000	£22,100	8.8%
£300,000	£4,600	£24,000	£28,600	9.5%
£400,000	£13,350	£32,000	£45,350	11.3%
£500,000	£23,350	£40,000	£63,350	12.7%

Did the Airbnb tax rules get worse for Edinburgh landlords?

The tax treatment of an Edinburgh Airbnb is clearly less generous now than it was under the old Furnished Holiday Let regime, especially for individuals using a large mortgage.

HMRC abolished the Furnished Holiday Let tax regime from April 2025. Short-term holiday-accommodation income now falls under the normal property-income rules.

Four old advantages disappeared. Individual owners no longer get the previous FHL treatment for finance costs; the normal restriction on mortgage-interest relief applies. The preferential capital-allowance regime for new expenditure disappeared. Access to certain capital-gains reliefs associated with trading assets was removed. FHL income also stopped counting as relevant UK earnings when calculating pension-relief limits.

The mortgage-interest change can have the largest day-to-day effect.

A highly leveraged individual taxpayer and a cash buyer can own identical Old Town Airbnbs, generate identical booking revenue and end up with very different after-tax results. Company ownership also behaves differently because companies can generally deduct qualifying loan interest when calculating taxable profits, although company ownership brings its own tax and extraction questions.

Any Airbnb investment calculator that stops at revenue minus cleaning, management and mortgage interest is too crude now. The ownership structure can change whether a leveraged Old Town deal makes sense.

Are mortgage rates too high for an Edinburgh Airbnb now?

Current borrowing costs make leveraged Old Town Airbnbs much less forgiving, and a weak deal can lose most of its cash flow surprisingly quickly.

Rightmove’s latest buy-to-let rate data puts average 75% loan-to-value two-year fixes around 5.4% for products with roughly £2,000 fees, with five-year averages at a similar level. Holiday-let financing is a specialist product, so an actual Airbnb borrower may receive different pricing, but conventional buy-to-let rates give us a useful benchmark for the cost of property debt today.

Take a £300,000 purchase with a £225,000 interest-only mortgage. At 5.4%, annual interest is about £12,150.

Before we even furnish the property, the buyer has put down a £75,000 deposit plus £28,600 of LBTT and ADS. Initial cash committed has already reached £103,600, excluding conveyancing, mortgage fees, furniture, repairs and any premium paid for an established short-term-let operation.

A property grossing £50,000 can absorb that debt burden. A property grossing £30,000 while paying a full-service manager, utilities, insurance, cleaning costs and common repairs has far less room.

Borrowing has also become more uncomfortable lately. UK mortgage pricing has started moving higher again as gilt and swap rates have risen, so we would leave more financing headroom than we would have a few years ago.

Illustrative £300,000 purchase	Amount
25% deposit	£75,000
LBTT + ADS	£28,600
75% mortgage	£225,000
Interest at 5.4%	~£12,150 per year
Cash committed before fees and furnishing	~£103,600

Is Edinburgh’s new visitor levy bad for Old Town Airbnbs?

Edinburgh’s 5% visitor levy slightly worsens Airbnb pricing today, but it is too small and too broadly applied to wreck a strong Old Town property.

The levy is already in force for eligible stays. Edinburgh charges 5% of the accommodation cost before VAT, capped at the first five consecutive nights. Short-term lets are included alongside hotels, hostels, B&Bs, aparthotels and other paid visitor accommodation.

The guest normally pays the levy, with the accommodation provider collecting and remitting it. So a £1,000 booking does not mechanically turn into £950 of host revenue.

There is still an economic cost. The guest sees a higher final bill and may respond by accepting a slightly lower nightly rate, shortening a stay or choosing somewhere cheaper.

Old Town is better placed than most Edinburgh neighbourhoods to push that extra cost through to visitors because location is a major part of what guests are buying. Someone coming specifically for the Royal Mile, castle or Fringe may care more about walking distance than a few percentage points on accommodation cost.

The city-wide design also helps. A nearby hotel cannot escape the levy and undercut an Airbnb by 5% simply because it belongs to another accommodation category.

We would include the levy in our pricing model, but it sits well below planning risk, acquisition tax and operating costs on the list of things that could kill the investment.

Can an Old Town Airbnb survive if we have to switch to long-term renting?

Old Town has a useful rental fallback, but the latest rent data shows why we would never overpay for an Airbnb on the assumption that a normal tenancy will rescue the deal.

Citylets’ latest postcode data puts the average EH1 rent at £1,228 per month for a one-bedroom property and £1,591 for a two-bedroom. EH1 is wider than the Old Town itself, but it is a much cleaner current benchmark than broad Edinburgh averages for a central property.

At £1,228 per month, annual gross rent is £14,736. Against Old Town’s £286,958 average selling price, that is roughly a 5.1% gross yield.

A two-bedroom earning £1,591 produces £19,092 a year. If we unrealistically hold the purchase price at the same £286,958, the gross yield would be 6.7%; in practice, a two-bedroom Old Town property will often cost more, so the real yield would generally be lower.

The wider Edinburgh rental market is healthy. Citylets says 70% of one-bedroom properties were letting within a month in Q2 2026, while average one-bedroom rents were almost unchanged year over year. Two-bedroom rents rose 1.3%, with 61% letting inside a month. Demand is solid even though the huge rent increases of earlier years have cooled.

That gives an Old Town owner a genuine Plan B. It does not give us an especially lucrative Plan B after an 8% ADS bill and borrowing around 5%.

A property that only makes financial sense as an Airbnb still carries meaningful downside.

Rental fallback	Current rent	Annual gross rent	Approx. gross yield using £286,958 price
EH1 one-bedroom	£1,228 pcm	£14,736	5.1%
EH1 two-bedroom	£1,591 pcm	£19,092	6.7%
Edinburgh-wide one-bedroom	£1,095 pcm	£13,140	4.6%
Edinburgh-wide two-bedroom	£1,449 pcm	£17,388	6.1%

What kind of Edinburgh Old Town Airbnb would we actually buy now?

The Old Town Airbnb we would buy today is already legally established, has several years of real booking data and still works financially when we use conservative revenue rather than the seller’s best festival year.

We would start with planning. The property should have clear evidence supporting its short-term-let use, ideally without relying on an uncertain new conversion application. A private entrance is especially attractive in Old Town because it removes one of the obvious sources of conflict with neighbours.

Next comes the licence. We would confirm its exact status, conditions and expiry date, then make sure the seller can use Scotland’s transfer procedure. An Airbnb listing, reviews and historic bookings are useful commercial evidence, but none of them replace the legal documents.

Then we would rebuild the operating account from actual records. Airbnb and Booking.com payouts, occupancy, nightly rates, management charges, cleaning, electricity, heating, insurance, repairs and common-building expenditure over at least twelve months tell us far more than projected revenue from an estate agent.

Old Town buildings also deserve more physical due diligence than a generic Airbnb spreadsheet suggests. Historic tenements can bring sizeable roof, stonework, damp, window and communal-repair bills. A £15,000 common repair can wipe out a substantial part of one year’s operating profit.

Finally, we would test the same property as a long-term rental. The investment becomes much more attractive when £30,000–£35,000 of short-term-rental revenue still gives us an acceptable return and £45,000–£50,000 creates the upside. Requiring an exceptional Fringe, perfect occupancy and maximum leverage every year leaves almost no margin for error.

Is buying an Airbnb in Edinburgh Old Town still worth it?

Yes, but only for a fairly narrow type of property: buying an established and legally defensible Edinburgh Old Town Airbnb can still be worth it today, while buying an ordinary flat and hoping to convert it usually is not.

The demand side remains excellent. Edinburgh hotels ran at 84.6% occupancy in 2025, short-term rentals currently average 68% occupancy, and Old Town sits at the centre of the city's visitor economy. We see no evidence that tourists have stopped wanting central Edinburgh accommodation.

The economics around that demand have become much tougher. Most investment buyers face an 8% ADS bill. The old Furnished Holiday Let tax advantages have disappeared. Borrowing around 5% or more consumes a meaningful share of operating profit. The visitor levy has added another cost to the guest bill. And, most importantly, Edinburgh's control-area rules mean we cannot safely assume that a normal residential flat can become a full-time Airbnb.

The latest supply numbers actually strengthen one part of the case. AirDNA counts 28.3% fewer active Edinburgh short-term-rental listings than a year earlier, while Scottish Government data shows only 3,209 Edinburgh licences or exemptions in operation at the end of 2025. Whatever the exact overlap between those datasets, the days when any well-located flat could casually join the short-term-rental market are gone. Existing compliant stock has become scarcer.

Scarcity alone does not justify paying any price. Old Town's average property sells for about £287,000, and the normal rental fallback for an EH1 one-bedroom is only around £1,228 a month. Add roughly £27,000 of transaction tax to a £287,000 additional-home purchase, then finance, furnishing and operating costs, and there is little room for an average Airbnb masquerading as a great one.

We would therefore buy only when three things line up: established lawful short-term-let use, documented operating numbers that still work under conservative assumptions, and a purchase price that leaves a reasonable return if revenue falls.

If the listing says “ideal Airbnb opportunity subject to planning,” we would price it as an ordinary residential flat.

If the listing already has the planning position, licence route, good historical revenue and sensible fallback economics, Old Town remains one of the few Edinburgh locations where the short-term-rental upside can still justify the extra complexity.

So the opportunity is still there. It has simply become much harder to fake.

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