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Aberdeen property market set for declines unless oil price picks up
Aberdeen has seen some of the strongest growth in the residential real estate market in recent years but now it is under a period of adjustment after seven years of phenomenal growth, according to a new analysis. The residential market across the Aberdeen area is being affected by uncertainty within the oil dependent local economy and prices have started falling, data for the third quarter of 2015 shows. According to the report from real estate firm Savills in the 12 months to the end of September 2015 the overall average sale price in Aberdeenshire was the second highest in Scotland, behind Edinburgh. The average price in Aberdeen City was the fourth highest, behind East Renfrewshire, over the same period. Indeed, data for the 10 year average for the overall residential market, values are 24% higher in Aberdeen City and 19% higher in Aberdeenshire, compared to 11% for Scotland as a whole. Furthermore, prime values in the Aberdeen area are 34% higher than they were in 2007, the peak of the Scottish market. This compares to a drop of 22% for Scotland as a whole. Despite the recent turmoil, monthly residential rental prices in Aberdeen remain the highest in Scotland. However, there was a fall of 2% in Aberdeen City and 4% in Aberdeenshire in mainstream prices during the third quarter of 2015, compared to the same period last year. Prime values in the Aberdeen area have dropped by 9% over the same period, with properties in rural locations most affected compared to city locations. Rental values in Aberdeen City dropped by 7% over the same period. The biggest impact has been felt in the volume of sales. During the year ending September 2015, the number of residential sales in Aberdeen City and Aberdeenshire fell by 5% and 11% respectively, compared to the same period last year. However, Faisal Choudhry, director of Savills Scottish research, pointed out that despite these drops, there are some sections of the market that have bucked the trend. These include properties between £300,000 to £400,000, which have seen a slight annual increase in sales of 5%. ‘Our analysis of new build developments shows an increase in the number of properties currently available between £200,000 and £300,000. This includes first time buyers, professionals and young families who are continuing to benefit from the comparatively lower rates of taxation and mortgages,’ he said. He also pointed out that while as a whole the introduction of the new Land and Buildings Transaction Tax (LBBT) in April pushed the number of prime property sales up by 10% but this was not the case in the Aberdeen area, where the number of prime sales fell slightly to 669 during the year ending September 2015, compared to 678 during the previous 12 month period. ‘This suggests the market was further constrained by uncertainty within the oil sector. Prime activity has been further compounded by higher levels of taxation as a result of LBTT, with the… Continue reading
Prices in key UK cities up over 10% year on year
Property prices in the UK’s key cities have increased by 10.1% year on year, driven by a chronic shortage of homes being put up for sale, and are set to rise by around 7% in 2016, the latest index shows. With demand high, the shortage of supply has been particularly felt in the latter stages of the year and this is reflected in a 5% drop in sales, the data from the Hometrack UK cities house price index also shows. London has seen the highest growth with prices up 13.3%, following on from 14.7% in 2014 and the average price of a home in the capital city has leaped by £52,900 year on year. The weakest rate of growth was in Aberdeen where average house prices fell by 2% compared to a 12% rise in 2014, the data also shows. The city with the strongest turnaround over the last 12 months has been Glasgow where growth has jumped from 1.8% a year ago to 8% today as prices recover off a low base in one of the most affordable cities covered by the index. The index report suggests that scarcity and low turnover of stock will remain features of market supporting price growth but at expense of greater risk of localised price volatility, especially in cities with stretched affordability. Richard Donnell, director of research at Hometrack, pointed out that moving amongst existing mortgage home owners accounted for the lowest share of housing sales in a decade at 33% compared to 50% in 2007. ‘This group are a vital source of new supply alongside new homes which account for 10% of sales a year. Strong demand from investors, most of whom are not sellers, has also exacerbated the erosion of available supply,’ he said. He believes that the real engine for house price growth in 2016 looks set to come from regional cities which have recorded much lower levels of house price growth in the last few years and affordability levels are far less stretched. The index also shows that house price to earnings ratios are well ahead of the long run average in London, Oxford and Cambridge yet across all other cities affordability on this measure is in line with the average over the last 12 years. Across the 20 cities covered by the index the average income to afford a home with an average 76% mortgage at a 3.5 times income mortgage is £49,700, up from £45,200 a year ago. Donnell also pointed out that while the average mortgage rate is at an all-time low of 2.6% the reality is that existing mortgaged home owners outside the south east seem reluctant to take on debt to bid up the cost of housing. ‘Debt servicing costs continue to fall with the average mortgage rate on outstanding mortgage debt down to just 3.1%. UK households have seen interest payments fall by a further £1.1 billion over 2015,’ he said. He also… Continue reading
UK asking prices down 1.1% in December, lowest seasonal dip since 2006
The UK residential property market has experienced its lowest property price dip for the end of the year since 2006, according to the latest index figures. Traditionally prices fall off in the run up to the festive season but the data from Rightmove shows that asking prices fell 1.1% in December and it is forecasting price growth of 6% for 2016. It says that increasingly stretched affordability and extra stamp duty on the buy to let sector will be outweighed by stark imbalance between supply and demand. Indeed, buyer enquiries to agents since the beginning of October this year are up 37% but the number of properties coming to market was down 5% compared to the same period in 2014. Looking ahead demand is expected to increase further in more affordable cities such as Leeds, Edinburgh, Cardiff and Manchester as highly skilled workers may choose to leave London for buoyant city regions. The lower than expected fall in prices mean that the annual increase is almost £20,000 or 7.4%, taking the average asking price to £289,452. ‘Whilst a fall is the norm at this time of year, this is December’s best post financial crash performance, signalling another round of price rises in 2016. Despite the shortage of suitable stock in many parts of the market, demand for housing is on the up,’ said Miles Shipside, Rightmove director and housing market analyst. ‘Although the average price of property coming to market is already up by a hefty 7.4% compared to a year ago, Rightmove forecasts that prices will reach and breach new records next year,’ he added. He explained that whilst initiatives are in place to encourage developers to build more new homes to supplement the supply of existing ones coming to market, the lead times are long and developers face capacity constraints. ‘In the meantime strong demand is being further fuelled by the additional momentum and aspiration for home-ownership that schemes such as Help to Buy create. We therefore predict that the average asking price will be another £17,000 higher by the end of 2016,’ said shipside. An analysis of Rightmove data by Dr Alasdair Rae, of the University of Sheffield, suggests that there could be an exodus of highly skilled workers leaving London for more affordable yet vibrant cities such as Leeds, Edinburgh, Cardiff and Manchester. But this ripple effect won't reach all towns and cities and continued stagnation or price falls are likely in less sought after areas in the north and west of the country, especially if buy to let investor activity tails off. Rae suggests that as choosier buyers demand easier access to amenities to satisfy convenience and lifestyle demands, expect to see increased price divergence between the more buoyant large urban markets and smaller urban areas that can’t offer the same range of facilities. ‘2016 may be the year when many young urban professionals finally give up on the London market and consider long term career moves… Continue reading
