Aberdeen area shows signs of recovery

...However, the level of available second hand mainstream stock remains high. Meanwhile, southern Kincardineshire and neighbouring areas continue to grow.

A modest recovery in oil prices and consumer confidence is being reflected in mainstream property values. From peak to trough, Aberdeen City’s average house price had fallen by 19%, from £199,285 in September 2014 to £162,113 in February 2017. The gap has narrowed slightly to 18%, as the average price has remained somewhat steady in recent months, reaching £163,847 in June.

Aberdeenshire’s average house price fell by 8% from peak to trough, from £202,570 in April 2015 to £186,114 in February 2017. There has been a rapid recovery in recent months, with the average price increasing since February by 8% to £201,145 in June this year, thus reducing the gap from peak to just -1%. However, this recovery has mainly been centred around locations that are within easy reach of Aberdeen City rather than rural locations, where the market is still subdued.

Activity has increased for the first time in three years

The number of residential transactions in Aberdeen City and Aberdeenshire reached 2,254 during the second quarter of 2017, which was 7% higher than the same period in 2016. This is the first increase since the second quarter of 2014.

The increase in activity was the highest across price bands up to £500,000, where the number of transactions increased by 14%. Above £500,000, the number of transactions fell by 20%. This reflects the lack of realistically priced fresh properties being launched onto the market at this level. There is strong demand for appropriately priced properties between £500,000 and £1,000,000, with current selling times averaging six weeks, compared to 14 weeks across all price bands in Aberdeen.

Stock levels are stubbornly high

Whilst transactions have started to recover, the number of available second hand residential properties has increased by 109% 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. A significant number also include one and two bedroom apartments, which typically attract first-time buyers and young professionals. However, such buyers, along with younger families, are now targeting semi detached and terraced properties, where prices have adjusted to more attainable levels (see Figure 2).

^{Source: Savills Research}

An appropriate pricing strategy is essential

Although we have witnessed an air of optimism in the Aberdeen area residential market, properties are still price sensitive. There is not enough strength in the market to simply list an Offers Over asking price in line with the Home Report valuation. Savills sales evidence to date confirms that the best price is achieved by setting the asking price between 5% and 10% below the valuation.

Southern Kincardineshire bucks the trend

Whilst the annual number of transactions in Aberdeenshire has fallen, southern Kincardineshire, which includes Laurencekirk and Fettercairn, has bucked the trend. The number of transactions increased annually by 10%. The level of prime transactions above £400,000 also recovered, with 17 taking place during the year ending June 2017, including four above £500,000. Transactional activity also recovered in the coastal town of Stonehaven, mainly up to £400,000.

The markets outside Aberdeen continue to grow

The neighbouring counties of Angus, Dundee City and Moray have remained unaffected by the recent boom and bust experienced in the Aberdeen area. Moreover, ongoing investment in Dundee City is assisting the Angus market.

Mainstream average house prices have reached record highs in 2017, however prime values are still 17% lower than the peak of 2008. Transactional growth has been modest and mostly took place up to £500,000. Above this level, the implications of LBTT are having an effect. Dundee City has bucked the trend, with 31 prime transactions above £400,000 during the year ending 2017, which is the highest number in five years.