Shining a spotlight on the Aberdeen property market

Happy New Year from all at DJ Alexander!

As we start 2024, it is a very exciting time for the Aberdeen and Aberdeenshire property market. The UK Government has set ambitious targets for Scotland to become a world leader in carbon capture and storage, and the Peterhead Carbon Capture project based in Aberdeenshire will play a pivotal role with the ability to capture up to 1.5MT of carbon annually, which represents around five per cent of the Government’s 2030 target.

Based on analysis from BiGGAR Economics, the report highlights the scale of the economic impact at a local, regional and national level. It is estimated that £2.2bn will be invested throughout the development, construction and the first 25 years of its operational life.

That will create significant benefits, with the report showing that £60m is expected to be contributed to the Aberdeen City and Shire economy during development and construction, with 980 years of employment supported. Over the station’s operational lifetime, it is estimated that around £25m will be added to the broader Aberdeen economy each year, with around 240 jobs supported annually.

At the end of last year, we saw the confirmation of 27 new oil licenses granted and confirmation from the UK government that legislation to be set out will require the North Sea Transition Authority (NSTA) to invite applications for new production licenses on an annual basis to “safeguard the prosperity of our country”.

This is a welcome boost for the UK oil and gas industry, which currently supports 215,000 jobs, including 90,000 in Scotland and 45,000 in the Aberdeen region alone.

So, what does this all mean for the Aberdeen property market? Currently, sales prices are extremely low whilst rental prices are climbing. There are over 2000 properties presently marketed for sale on ASPC, with the average price for a 1 bedroom sitting at around £85,000 and the average rental price for a 1 bed sitting at around £550 per month; this gives a yield of almost 8%.

With the average yield in the UK sitting at 4.75%, Aberdeen, at the moment, offers a huge investment potential for buyers who have capital to invest in the city. In Peterhead, where the carbon capture project will be based, the average property price for a 1 bedroom flat is sitting around £48,000-50,000, and the average rental price is £425 for a 1 bedroom; this gives a yield of just over 10% which would be unrivalled across other parts of Scotland.

The downsides? The oil market is volatile, and despite Donald Trump’s recent quote during his trial for civil fraud where he declared that “Aberdeen is the oil capital of Europe, very rich!” The Aberdeen economy, particularly the property market, has suffered greatly over recent years due to the downturn in the oil market. Both rental and property sales prices almost halved in a short period and have only started to recover 8 years later.

The future for the oil market is optimistic; however, with the recent announcements and coupled with the newly created carbon capture project, the creation and stability of jobs in the area will prove Aberdeen and Aberdeenshire to become once again a popular place for professionals who work in the industry to relocate into the city. We should see supply and demand return to a more even keel.

If you’d like to discuss investment opportunities in Aberdeen and Aberdeenshire, please get in touch with our team.