Spotlight:

Aberdeen Area Residential Market

Aberdeen Area Residential Market
Aberdeen Area Residential Market

23 November 2016, by Faisal Choudhry

Residential property values need to be adjusted while the local economy rebalances

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Summary

■ The impact of Aberdeen’s oilshock has resulted in a 24% fall in sales, yet there is little evidence of a corresponding reduction in property values.

■ An adjustment in prices will help to generate demand, reduce the high level of available stock and begin a housing market recovery.

 

■ Providing Aberdeen area house prices adjust in the short term, the prospects for longer term recovery are good.

■ The market will be underpinned by quality housing, top educational facilities, improving infrastructure and a diversifying economy.

Foreword

The residential property market in the Aberdeen area is being impacted by current uncertainty within the oil and gas sector and resulting decrease in consumer confidence. In just two years, the impact of Aberdeen’s oil-shock has resulted in a 24% fall in the annual number of house sales, yet there is little evidence of a corresponding reduction in property values.

Those who need to sell relatively quickly may wish to consider setting significantly reduced asking prices. This is especially for sellers who, like many property owners in Aberdeen, have large levels of equity in their current homes. Others may wish to take a medium to long-term view with regard to buying and selling while Aberdeen’s local economy rebalances.

It is more important than ever for home owners to take a proactive approach and to make informed decisions. For properties to sell in the current market, it is essential that they are priced appropriately, well presented and promoted to the widest possible audience, beyond the local market.

The oil crisis and resulting falling consumer confidence, has led to a rise in homes being launched to the market, with less people in a position to buy. Housing stock levels have increased by 94% since March 2015, leading to a gridlock in market activity. Prevailing macro economic and political issues, are further impacting confidence including the EU Referendum vote and the additional burden of Land and Buildings Transaction Tax (LBTT) payable on higher value properties.

Yet, house prices have only fallen by 7% since 2014, with little adjustment being made for properties that are struggling to sell.

While exceptional properties continue to attract buyers, in general there is now an imbalance between supply and demand. We have forecasted an annual drop of 6.5% in Aberdeen mainstream values in 2017. This will help to generate demand and begin a housing market recovery in Aberdeen (see Figure 1).

Providing house prices adjust in the short term, the prospects for the medium to long-term recovery are good. The Aberdeen market will continue to be underpinned by high quality housing, top-performing schools, universities, good local amenities, improving infrastructure and an increasingly diversified local economy, which is not solely dependent on oil.

FIGURE 1

Five-year residential annual change forecasts

 
Figure 1

Source: Savills Research

Articles from 'Spotlight: Aberdeen Area Residential Market'

Aberdeen area residential market

Prospects for longer term recovery are good, providing prices adjust

The wider local economy

23 November 2016

The wider local economy

The market will be underpinned by a diversified local economy

 
 

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Key contacts

Faisal Choudhry

Faisal Choudhry

Director, Scottish Research
Residential Research

Savills Glasgow

+44 (0) 141 222 5880