Spotlight: North East Scotland

North East Scotland
 
Aberdeen area recovery continues

15 November 2017, by Savills Research

The market is looking brighter, with values stabilising and transactions recovering

 

Residential market recovery across the Aberdeen area has continued throughout 2017. However, the level of available second hand mainstream stock remains high.

According to the UK House Price Index, from peak to trough, Aberdeen City’s average house price had fallen by 19%, from £199,285 in September 2014 to £161,803 in February 2017. The gap has narrowed slightly to 16%, with the average price picking up in recent months, reaching £167,903 in August.

Aberdeenshire’s average house price fell by 8% from peak to trough, from £202,570 in April 2015 to £186,376 in March 2017. The months of May and June saw a mini recovery in average prices, with the peak to trough gap narrowing to 3%. However, the average price fell back to £188,876 in August, thus highlighting the fragile nature of the current market.

FIGURE 1

Five-year residential annual change forecasts

 
Figure 1

Source: Savills Research

An increase in transactional activity

Alongside a recovery in average prices, the Aberdeen area has also witnessed modest growth in transactions throughout this year. The number of residential transactions in Aberdeen City and Aberdeenshire reached 5,994 during the first nine months of 2017, which was 2% higher than the same period in 2016. This is the first annual increase since 2014, when the number reached 8,108 during the height of the energy market.

The recovery in transactions was led by the second hand market, whereas new build activity fell by 13% this year. This reflects the 23% annual drop in new house building in Aberdeen City and Aberdeenshire during the financial year 2016–17.

While the market up to £400,000 is still adjusting, activity above this level has stabilised, especially in the second hand market. There were 218 second hand transactions between £400,000 and £1 million during the first nine months of 2017, compared to 204 over the same period in 2016.

The overall market above £400,000 is also attracting more buyers from outside Scotland, with the number originating from the rest of the UK almost doubling this year.

Suburban hotspots leading the recovery

Within Aberdeen City, the AB13, AB15 and AB25 postcodes led the recovery this year, with a 20% annual rise in transactional activity, supported by new build sales. These areas include the hotspots of Aberdeen’s West End and the sought-after suburbs of Bieldside, Cults and Milltimber. This shows that in times of uncertainty, buyers are drawn to prime hotspots, which are considered safe investments.

In Aberdeenshire, the strongest growth in transactions this year took place in locations that are within easy reach of Aberdeen, including Portlethen and Westhill and also the hotspot of Banchory, where the local secondary is one of Scotland’s top-performing state schools in terms of Higher exam results. Meanwhile, there was a 25% annual increase in the number of transactions in southern Kincardineshire, which includes Laurencekirk and Fettercairn. Transactional activity also recovered in the coastal town of Stonehaven, mainly between £200,000 and £400,000.

Stock levels reducing above £400,000

Whilst transactions have started to recover, the number of available second hand residential properties has doubled since the beginning of 2015. The majority is between £100,000 and £200,000 and includes many buy-to-let properties, which have been impacted by significant falls in rental prices. Compared to last November, the amount of available stock in this price band has increased by 25%. However, above this level, the amount has reduced by 6%, including a 15% drop above £400,000, reflecting the improved transactional activity.

Prospects for longer term recovery are good, providing prices adjust

Our Aberdeen area residential values five-year forecast reflects recent stability in average prices and improving transactional activity. While exceptional properties and established locations will continue to attract buyers, the increasingly high level of available stock will suppress value growth in the short term. This adjustment will help to generate demand and begin a housing market recovery in Aberdeen, with values expected to grow by 4.5% by 2022.

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