Aberdeen house prices compared to this time last year have seen the biggest fall in Scotland.
Figures from Your Move, compiled by Acadata, showed prices in Aberdeen had dropped nearly 20% from April 2015/16 – more than double the Scottish average fall, which stands at 7.8%.
Acadata housing analyst John Tindale said the continuing impact of the oil price crash was the main reason for the drop.
He said: “It’s largely down to supply and demand. It’s important to mention places like Aberdeen and Aberdeenshire all saw prices rocketing through the roof just ahead of the new Land and Building Transactions Tax coming in last April.
“But because the demand continues to fall away we’ve seen prices lowering and I can’t see that changing until something happens with the low oil price.”
Aberdeen Solicitors’ Property Centre (ASPC) chairman John MacRae said there were glimmers of hope.
He said: “Aberdeen and the North-east was one of the first places in Scotland to recover after the 2008 crash but the rest of Scotland saw its own recovery around 2013/14.
“The volume of sales has gone down 30%, which is causing concern, but we’re still seeing about 90 sales a week. We have seen big job losses and the EU referendum is having an impact too, but I am expecting things to improve. We just have to sit tight.”
Dispute all the gloom news, every dark cloud has a silver lining. It’s a buyer’s market, it’s a good time for first time buyers to try get on to the market or investors looking to pick up properties for the long term.
Aberdeen house price fall blamed on oil slowdown and LBTT.
House prices in Aberdeen have remained steady in the second quarter of 2015 but the volume of sales has dropped, according to new figures.
A new report ublished by Aberdeen Solicitors’ Property Centre Limited (ASPC), in co-operation with the University of Aberdeen, Business School, Centre for Real Estate Research, shows that sales in the second quarter were down 9.4 per cent on the same period last year.
The second quarter of the year is usually the most active period for sales.
John MacRae, chairman of the ASPC board of directors, said the slowdown of the North Sea oil sector and the introduction of the Land and Buildings Transaction Tax (LBTT) had a definite negative impact on sales.
House prices in Aberdeen city and suburbs increased by 0.1 per cent in the second quarter, compared to a 8.5 per cent increase across Scotland and a 3.3 per cent increase across the UK.
The average price for a flat was £167,589, a semi-detached house was £231,904, and a detached house was £355,782.
Mr MacRae explained: “The second quarter figures for 2015 demonstrate that, generally, house prices in our area have remained steady but the volume of sales has dropped.
“In my note to the figures for the first quarter of 2015 I mentioned the varied background features affecting our local market, not just the headline oil industry difficulties.
“We are now in a position where the effect of the change from stamp duty land tax to Land and Buildings Transaction Tax is beginning to wear off as the market becomes conditioned to the changes.
“Nevertheless part of the reason for the decrease in numbers of sales will be attributable to a certain section of the market above £350,000 being less active than before due to the higher incidence of LBTT in that sector.
“Undoubtedly, the continuing problems in the oil industry will also be having an effect and, given past experience of similar situations, I do not think that the effect of the oil price is yet fully reflected in our local market activity.
“Given the economic background in this area, however, the 2015 figures are holding up very well and there should not be an unduly pessimistic outlook for our market given that there are positive features (the low cost of borrowing, the good activity in starter homes and flats) in our market.”
Source http://www.scottishlegal.com July 29, 2015
Aberdeen is facing a housing crisis as diving oil prices threaten to drag down the value of the city’s homes, many of which were bought with huge levels of debt in the belief that the hydrocarbon boom would continue unabated, according to an alarming new report.
The North Sea industry headquartered in the city has boomed in recent years as oil hovered around $100 a barrel. This contributed to a doubling of house prices there over the past decade, and buyers have been forced to stretch themselves further and further to get onto the property ladder.
But oil prices have dropped by 60 per cent to below $50 since July and are expected to remain around that level for some time, meaning the house-price boom is in danger of going into reverse.
“The oil-price crash could drag down the housing market in Aberdeen and a considerable number of people could suddenly find themselves in negative equity,” said Jeremy Willmont of the report’s author, accountancy firm Moore Stephens. “If the oil price is this low when interest rates eventually start to rise the outlook for the Aberdeen property market could get considerably worse.”
He added: “The oil-price fall has already had a negative impact on the employment prospects for some of those working in the oil industry. Second-line consequences for the housing market may now start to emerge.”
While disposable incomes in Aberdeen have risen faster than elsewhere in the UK over the past five years, thousands of jobs are expected to be lost in the area as North Sea fields become unprofitable to run at the reduced oil price. Companies such as BP have already announced hundreds of job losses, while many contractors in the industry have been forced to take a 15 per cent cut in their rates.
The possibility of repossession is high in Aberdeen because the city is so tied to the fortunes of a single, now struggling, industry. Furthermore, its homebuyers have taken on higher levels of debt than in any other Scottish city in the past decade.
The number of local people with mortgages that are characterised as “risky” by the Bank of England has risen by 42 per cent in the past four years, giving a total of 2,128 over the period. The figure compares badly with increases elsewhere, with a 10 per cent rise in Edinburgh and 2 per cent across Scotland according to data from Registers of Scotland.
A mortgage is said to be “risky” when homeowners borrow 4.5 times their salary and those that have been taken out recently are endangered by the threat of redundancy, falling house prices and rising interest rates.
Aberdeen’s housing market is also awash with highly leveraged mortgages where borrowing has not reached, but is close to, 4.5 times the borrower’s salary, as well as “risky” loans taken out before 2010, Moore Stephens contends.
The current situation is in contrast to last spring’s price surge, which contributed to a 9.8 per cent house-price increase in the first nine months of 2014. However, Aberdeen property prices suddenly slumped by 1.5 per cent in the final three months of the year, leaving the average price of a home in the Granite City at around £225,000.
Source: Independent Newspaper, Feb 2015.