Which city in the UK has seen the greatest property price growth over the past decade? It isn’t the hotspots of the south, such as London or Oxford. The answer, surprisingly, is Aberdeen, where house prices have more than doubled over the past decade, according to various studies, including a report published late last year by the Nationwide Building Society.
Why? In a word: energy. Oil and gas– as well as a growing focus on renewables and the kind of logistical support and research investment that has transformed the so-called Granite City into one of the world’s leading centres of energy expertise – has propped up the Aberdeen economy in recent years, helping it to weather the recession well. Average house prices are now over 5 per cent higher than just a year ago, according to Rettie & Co, a Scottish estate agent – and 120 per cent higher than 10 years ago, which is, albeit from a low base, the biggest regional percentage rise in the UK.
Some London boroughs have seen similar price rises, such as Westminster in the heart of the capital and the western pocket of Hammersmith and Fulham, but Aberdeen is the only city to have seen nominal growth above 100 per cent over the past decade. In London, as a whole, the increase has been 82 per cent, by comparison.
Since the mid-1970s, Aberdeen has transformed from fishing port to offshore prospecting base and now, as it tries to mitigate against dwindling offshore resources, into a centre of engineering and renewables expertise. It has 1,000 businesses operating within the energy sector. About 38bn barrels of oil equivalent have so far been produced from the UK continental shelf, with the potential for a further 15bn to 25bn still to be extracted. And, bar a steep fall in Brent crude prices in 2008, oil prices have broadly risen over the past decade, currently averaging almost $120 a barrel – almost four times the price 10 years ago.
“Prices in Aberdeenshire were very much in line with Scotland up until 2006/2007,” says Faisal Choudry, director of research at estate agent Savills Scotland. “But the recession widened the gap between them and the rest of the UK. At the same time that other locations were falling into recession in 2008/2009, Aberdeen began to pull ahead because its housing market was intrinsically linked with a thriving industry.
The average house price is now £220,000 – the same as in Edinburgh, a market more traditionally associated with well-heeled buyers. An influx of workers to Aberdeen (unemployment is less than half the national average) has also meant a thriving rental market. Low supply has fuelled this boom, with an average of just 523 new housing completions each year since 2006.
It is the upper end of the market where sales have grown the most. Between 2004 and 2008 there were just 46 sales of £1m-plus in the Aberdeen area, according to Savills, but between 2009 and 2013 there were 91 – a rise of 98 per cent. Across Scotland the sales of properties priced £1m-plus fell 25 per cent over the same period.
The area where house prices have grown most quickly has been the coveted AB15 postcode, home to oil tycoons such as Douglas Craig, chairman of the family-run shipping and energy services company, the Craig Group. AB15 includes property hotspots such as Cults, on the banks of the river Dee, and Bieldside, two suburbs with the feel of a country village, where a mixture of new-build timber houses and older stock forged from Victorian granite appeal to more affluent families. A five- or six-bedroom home with 2,500 sq ft of living space and a large garden will cost about £850,000.
New wealth has since attracted other infrastructure projects. In 2012 US tycoon Donald Trump opened a luxury resort in Aberdeenshire, the Trump International Golf Links, which also has a five-star hotel and plans for total development worth at least £750m. Some of this development, including another golf course and larger hotel, has been delayed while a dispute over a nearby wind farm is resolved. However representatives for Trump say that he has every intention of going ahead with the full plans.
The further that buyers are prepared to venture out of the city into “the Shire”, as the surrounding countryside is known, the grander the homes available. Rettie is selling Breda House, a refurbished baronial mansion with seven bedrooms, 128 acres of arable land and salmon fishing rights on the river Don for £2.25m.
However, such areas are also popular with developers catering to mid-level workers looking for family homes below £300,000. Two examples are Inverurie, a market town 25 minutes by train from Aberdeen, and Alford, a village within half an hour’s drive of the city. Both attract city commuters and offshore workers and act as a beacon for property developers and retailers. In Alford a detached four-bedroom home will cost £260,000.
Despite uncertainty about the possible impact of Scottish independence, confidence remains high about future growth, especially at the upper end of the housing market. Savills forecasts that prime property prices (those above £400,000) in Aberdeen will rise 29.4 per cent over the next five years, which puts it ahead of even prime central London (forecast to rise 23.1 per cent over the same period). Even mainstream prices in Aberdeen are expected to rise 35.1 per cent over the next five years, compared with 19.3 per cent across Scotland as a whole.