A city’s housing market that suffered badly because of the collapse in North Sea oil prices is now likely to rebound as the energy industry emerges from a downturn.
Research by Aberdein Considine, a law firm that also operates as a sales and lettings agency in Aberdeen, says buyers are now able to take advantage of lower property prices amid warnings that a new skills shortage could trigger a similar worker influx to the one which almost doubled average property values in the late 1980s and 1990s.
The company says the UK government’s Oil and Gas Authority has suggested the down-sizing of the oil industry, seen in recent years, “may now be over”.
North Sea operators are also expected to generate a £10billion cash surplus this year - the highest figure achieved since 2010 when the industry was enjoying a boom.
Aberdeen Considine says the turnaround comes as an estimated £8.4 billion worth of capital investment in the wider north-east economy comes to fruition.
The firm says there are direct links between the fortunes of the oil business and the city’s housing market, with parallels now being drawn with the oil downturn of 1985
The job cuts made then caused a labour shortage in the supply chain just a few year later – and an influx of skilled workers in the decade which followed helped push property prices from around £38,000 on average to almost £75,000 by 1997.
Robert Fraser, senior property partner at Aberdein Considine, says the current market is the best property buyers have experienced in 20 years – saying that people can now get a two-bed flat for the same price as a one-bed in 2014.
“Since the oil price crash of 2014/15, when the Brent Crude benchmark dropped to under $30, we have seen a gradual decline in average sale prices in both Aberdeen and Aberdeenshire” he says.
“So far this year, the average sale price in Aberdeen alone is £179,485, down around 15 per cent on the 2014 peak. However, with oil now sitting above $80 again – and suggestions that global events could push it higher – savvy buyers and investors are returning to the market in Aberdeen.”
At the 2014 market peak, there were around 3,000 properties on the market at any time. That number sits at over 6,000 today, with a particular oversupply of city centre flats.
This has created a buyers’ market where properties are changing hands for below formal valuation prices in many cases.
While buyers across the rest of the UK will have a close eye on Brexit, Fraser says the Aberdeen market’s rapid rebound from the global financial crash of 2008 proves that the Brent Crude price is “more important to the local economy and therefore local house prices”.
The cost of producing oil is more than 50 per cent cheaper now than in 2014, and the firm’s research suggests that 70 per cent of the undeveloped oil discoveries in the basin have break-even costs of less than $60 and are therefore profitable at today’s oil prices.