High value homes in the north east of Scotland are proving harder to shift with an increasing number coming on the market at lower prices than before, according to property experts.
Prices for high-end homes in the region have fallen or flat-lined in recent months in both the sales and leasing sector.
Monthly rental of a typical four-bedroom family home in Aberdeen has dropped nearly 20% in the past 12 months. The price of an average detached home has fallen 1.7% in the same period.
Adrian Sangster, national leasing director at city law firm Aberdein Considine said the oil and gas slump, which has seen thousands of highly paid jobs lost in the past year, was having a big impact on the rent landlords could expect to receive.
According to research by Scottish letting specialist CityLets, average monthly rental for a four-bedroom house in the third quarter of 2014 was £2,148 compared to just £1,776 in the same period in 2015 – almost exactly the same price they were in 2007.
The price of a two-bedroom Aberdeen flat peaked in the first quarter of 2015 (January-March) at £1,053, compared to £944 in July-September. One-bedroom flats dropped from a peak in quarter four 2014 of £722 to £651 in quarter three 2015.
“We have certainly seen an increase of top end properties on the market. You just need to drive round to see the ‘to let’ and ‘for sale’ signs all over the west end of Aberdeen,” said Sangster.
“How will it develop in the next six to nine months? Having seen previous highs and lows over the past 25 years, I think it’s going to go further down before it levels out.
“You have to remember the Aberdeen area has been very lucky for the past five to seven years , since the property crash in 2008. We have seen almost continuous growth. Even with the recent price drop we are still the most expensive area in Scotland to rent a four-bedroom property.”
In comparison, a similar home in Edinburgh, the next highest area, costs an average of £1,691 per month to rent. Sangster said he expected Edinburgh rents to rise and overtake Aberdeen in the near future.
Sangster added: “Aberdeen has lived in its own little bubble the past few years.”
The rental market for smaller properties – one and two-bedroom flats in particular – was still healthy and lower rental rates had opened up the market to people who had previously been priced out, he said.
“In August we carried 750 views by our city-centre office alone, so it’s not all doom and gloom. If landlords are realistic in their rental expectations, there is still demand.
“We all have to get used to the ‘new normal’. The days of putting a property on the market and it moving within a week have pretty much gone. The constant rise in prices was going to run out of steam at some point. The market will hope it’s going to be a gradual downturn,” he added.
Generous relocation packages offered to oil and gas company employees have also dried up, he said. During the boom, firms desperate to attract skilled workers, offered rental properties as part of remuneration packages.
Mary Smith, managing director of Relocation Scotland in Aberdeen, works with many of the oil majors and big service companies in the city. She said the market was experiencing a “correction”.
“A top end property somewhere like Kepplestone might still go for around £3,800 to £4,000 per month, but there really needs to be a wow factor now. Landlords are having to work much harder to rent out properties. All the contractors have gone, expats have gone and the Monday to Friday renters are also away. It has been really tough this year.
“But it needed a correction, last year before the slump was crazy and the market was overheating.
“I think a lot of buy-to-let speculators who mortgaged to acquire property are finding it tough. They need to get rental income in and there just aren’t the people there anymore.”
The house sale market is experiencing a similar slowdown to the rental sector, according to Bill Barclay, head of residential property at Raeburn Christie Clark and Wallace in Aberdeen.
He said: “There is no question higher-end properties are taking longer to sell with less people moving up the housing ladder. My advice to anyone selling a property is to be realistic about what to expect. There are still deals to be done.
“Aberdeen for so many years has been a sellers market and there are signs that it is becoming a buyers market, but that is not necessarily a bad thing. It gives people the opportunity to acquire properties – often in the most desirable areas of the region – that might otherwise have been out of reach.”
The most recent figures contained in the Aberdeen Housing Report by Aberdeen Solicitors Property Centre and University of Aberdeen revealed average house prices in the third quarter of 2015 had dropped by 1.7% on the same period in 2014 with a typical detached house fetching £350,337.