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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
Average rents in England and Wales fall almost 1%, down under £700 per month
Average rents across England and Wales fell by 0.9% in November but are up 4% compared to a year ago with London rents even higher with 8.9% growth year on year. This takes the average rent to £799 a month which means they have fallen below the psychologically important £800 mark, according to the latest buy to let index from Your Move and Reeds Rains. Average rents now stand at £799 per month. This follows a month-on-month fall of 1.2% – down from September’s all-time record high of £816. Despite month-on-month falls, rents have risen considerably over the course of the last twelve months. Across England & Wales annual rent rises stand at 4.0%, comparing November 2015 with November 2014. Taking into account CPI inflation of 0.1%, this leaves real-terms annual rent rises of 3.9%. Adrian Gill, director of estate agents Reeds Rains and Your Move, pointed out that while rents are cooling right now this could be different next year when the new 3% extra stamp duty becomes payable on buy to let properties as this could force rents upwards again. A breakdown of the figures shows that six out of 10 regions seen rents fall on a monthly basis, Wales has seen rents rise by 2.9%, the East Midlands by 1%, the West Midlands by 0.4% and Yorkshire and the Humber by 0.2%. On the back of this, both Yorkshire and the Humber and the East Midlands have seen fresh record rents of £554 and £610 respectively. By contrast southern regions have led the downturn in rents downwards. The South East saw rents fall by 3% month on month and they were down 2% in the South West and 1.2% in London. However, year on year rents are 8.9% higher in London and 8.4% in the East of England. They are also up 5.1% in the East Midlands. By contrast Wales has seen rents drop 3.8% in the space of 12 months and the South East is down 3.5%. The index also shows that the gross yield on a typical rental property in England and Wales, before taking into account factors such as void periods, dropped to 5% in November, down from 5.1% in October 2015. This is also higher than the 5.1% gross yield seen a year ago in November 2014. Accelerating property purchase prices have boosted landlords’ finances, despite suppressing rental yields. Taking into account both rental income and such capital growth, the average landlord in England and Wales has seen total returns of 10.9% over the 12 months ending November 2015, up from 10.4% in October 2015. In absolute terms this means that the average landlord in England and Wales has seen a return of £19,668, before any deductions such as property maintenance and mortgage payments. Of this, the average capital gain contributed £11,057 while rental income made up £8,611 over the… Continue reading
