Since the Scottish referendum in 2014 there has been enormous interest in Scotland’s oil assets and in particular the city of Aberdeen which is heavily dependent upon the industry. The price of oil has reduced from in excess of $100 to under $50 per barrel with some experts suggesting a levelling out at around $60 in the short to medium term. This has caused a major upheaval in the Aberdeen oil industry and as a consequence the Aberdeen property market has suffered. However, while property in Aberdeen may well be down it is certainly not out.
Third-quarter figures 2015
We have seen a number of reports lately regarding the Aberdeen property market although the Aberdeen Solicitors Property Centre Ltd survey casts a very interesting eye on the third quarter of 2015. The third quarter saw a reduction in Aberdeen city property prices of 0.8% against a Scottish wide average reduction of 1.3%. This will surprise many people although it has to be said that looking back a little further the figures are not quite as impressive.
The average value of houses in Aberdeen city fell by 1.7% in the year ended September 2015 against an average rise across Scotland of 6.4% over the same period. This, as opposed to the short-term performance of Aberdeen property, perfectly illustrates the ongoing issues the area is facing.
Property sales volumes across the Aberdeen area were down 8.7% between the second quarter and the third quarter of 2015. However, they were down a worrying 15.1% compared to the third quarter of 2014. While this obviously illustrates concern regarding the short to medium term outlook of the Aberdeen property market, and the ongoing issues with the oil industry, the reduction in Aberdeen property prices is probably less than many would have expected?
Some experts in the area believe that investors are currently sitting on the sidelines as are those looking to dispose of their property in the short to medium term. This would indicate, as we suggested above, short-term concern is effectively paralysing the market as everybody waits for a clear indication of the longer term trend. It is also worth noting that historically the third quarter has always been lower than the second quarter of each year due to seasonal issues. So, are we worrying about nothing or should we be concerned about the outlook for Aberdeen property?
Compared to the rest of Scotland it is difficult not to be disappointed by the annual difference in property price performances. Aberdeen has gone backwards while the rest of Scotland has gone forwards although there are certain issues to take into consideration. In many ways the decimation of the Aberdeen oil industry has led to a partial paralysis of the regional property market but looking at the collapse in the price of oil it has perhaps performed better than many had expected?
There is no doubt that the local economy is heavily dependent upon the oil industry but both the UK government and the Scottish government are determined to increase their financial assistance to save the industry while these difficulties prevail. Longer term, oil companies will adapt as will their workforce and demand for local property will eventually return. So, at this moment in time the Aberdeen real estate market is perhaps down but certainly not out!