The Aberdeen area was not immune from the effects of the extreme weather across Scotland earlier this year. There was an 11% drop in transactions, from 3,819 during the first six months of 2017 when market recovery commenced, compared to 3,400 during the same period in 2018.

However, activity has picked up again in the second half of 2018 and average prices have remained stable in recent months. Despite the stability, the overall market will remain fragile until we see a sustained period of stable transaction and pricing levels.

While the overall market remains challenging, some sections are seeing more activity. Second hand transactions above £500,000 in Aberdeen City during the year ending September 2018 were on a par with the number during the year ending September 2017.

In Aberdeenshire, the second hand market between £300,000 and £500,000 and also above £700,000 witnessed a modest recovery over the same period. Transactional activity across all price bands in Aberdeen City’s new build market also improved, supported by incentives.

New build market stimulating overall recovery

The recovering new build market is stimulating the second hand market in some parts of the city. These include the traditional hotspots of Bieldside, Cults and Milltimber, where a 34% annual increase in new build transactions supported a 4% increase in second hand transactions. The Cove Bay area in the south of the city, where new build transactions almost doubled, also witnessed a modest recovery in second hand activity.

In Aberdeenshire, the strongest growth in transactions last year took place in locations that are within easy reach of Aberdeen, particularly those with train connections and amenities. These include Alford, Inverurie and the Kincardineshire hotspot of Stonehaven.

Stock levels beginning to peak

The high level of available stock remains a key barrier to Aberdeen’s long term market recovery. The number increased by 12%, from 5,016 in November 2017 to 5,627 in November 2018. But the number has slightly dropped since July this year, when 5,674 were available. With the exception of the market up to £100,000, all other bands have seen stock levels beginning to ease.

Supply is less saturated above £400,000 in particular, and this is being reflected in improved transactional activity in some areas. Whilst just over half of the overall stock has been unsold for a number of years, there are now more realistically-priced mainstream properties being launched.

Properties offered to the market in good condition and correctly priced continue to attract strong interest. However, the market remains challenging for remote houses in poor condition. For these properties, significant price adjustments or upgrading will be a necessity.

Outlook for prices

High stock levels have impacted house price performance in the Aberdeen area. However, prices are beginning to find their level, with the monthly average in Aberdeen City and Aberdeenshire staying around the £160,000 and £190,000 level respectively for most of 2018, according to the UK House Price Index. But prices are currently around 4% lower than 2017. Therefore, an expected overall annual drop of 4.5% in Aberdeen area prices at the end of 2018 should not come as a surprise. We expect price drops easing in 2019, subject to a further reduction in stock levels. This will enable a recovery from 2020. Prices will follow a similar trend to the rest of Scotland from 2020 onwards, with 4% growth over the five-year period between 2019 and 2023.

Angus leads the wider North East

Whilst the overall number of transactions in the North East locations outside the Aberdeen area slightly dropped during the year ending September 2018, Angus bucked the trend, witnessing a 3% increase. Meanwhile, prices, particularly in Dundee and Moray, continue to grow, supported by more higher value activity.

The market in Angus has grown mainly up to £500,000 with improved second hand activity in Brechin and around the periphery of Dundee, and also more new build activity in Arbroath.

Transactional activity in Dundee City fell annually by 2% over the last 12 months, mainly due to constrained supply below £300,000. Above this level, transactions increased from 103 during the year ending September 2017 to 122 during the year ending September 2018, which led to a 3% annual increase in average prices over the same period.

A similar trend was witnessed in Moray, where transactional activity fell annually by 7%, due to constrained mainstream supply. Above £300,000, transactions increased from 72 during the year ending September 2017 to 90 during the year ending September 2018, which led to a 4% annual increase in average prices over the same period.