Aberdeen Property Market & Brexit Relationships Explained
Property experts express their opinions on data regarding Scottish house market after Brexit. By Gioia Brogioni
Since the 2016 Brexit Referendum, house prices have been a very much talked about subject as political uncertainty has been making things confusing for all the players involved. According to the latest statistics, 2020 is due to be a much more positive year than 2019 for the housing market, with Aberdeen being an appealing location for both well-experienced investors and first-time house buyers. Yet, according to the experts, a no-deal Brexit may still slow down this process of regrowth.
The past decade saw a rollercoaster in house price trends on a national level. In particular – after a small increase in house prices at the beginning of the decade, right after the financial crash – prices started to fall.
From a certain point of view, low house price inflation or, in the worst case, property prices falling can be positive, as it makes things easier for first-time buyers. However, on the bigger scale, it dented banks’ and bigger building societies’ willingness to lend on properties, ultimately resulting in a stagnant market.
Yet Scotland properties have been looking the most appealing for both banks and investors until the last couple of years, when Aberdeen registered some of the most worrying data according to the Zoopla UK Cities Index.
In particular, in August 2019 Zoopla reported Aberdeen’s house prices sharpest fall in the previous 12 months at -4%. According to Aberdein Considine’s statistics, the average price for a house in Aberdeen is now £193,141.
Initially, Zoopla attributed this to the 2015 oil price collapse and later the economic instability brought about by Brexit. Aberdeen is indeed one of only four of the United Kingdom’s local authority areas where prices have fallen since the beginning of the decade, together with County Durham, Hartlepool and Dumfries and Galloway.
Yet, Bob Fraser, senior property partner at Aberdein Considine, said late in November that Aberdeenshire has “weathered the worst” of the house market downturn.
In fact, the economic instability brought about by Brexit has undeniably challenged the property market all across the United Kingdom, but mostly in Southern England. According to the Zoopla Report, the Brexit anxiety has weighed particularly on London properties that now take a month longer to sell than three years ago.
Also, Lucian Cook, Savills’ head of residential research, said to This is Money earlier this January: “From June 2016 onwards, post-EU referendum sentiment has dominated and a slowdown in the capital has resulted in a reverse ripple through the commuter zone. In this latter period, the average London home has gained just 26p a day compared to the North-East (of England)’s £6.19 and nearly £23 in the East Midlands.”
Research and insight director at Zoopla, Richard Donnell said to the Evening Express: “There is a continued polarization in housing market conditions across the country.” Meaning that, while in London sellers are accepting bids 5.7% below the asking price, in Scotland housing affordability remained attractive. According to him, in this part of the country, continued economic growth supported the demand for homes and resulted in “reasonable sales periods and only modest gaps between sales and asking prices”.
As a matter of fact, despite the house price fall, Aberdeen’s property market also saw an increase of 14% in cash buyers over 2019. Liverpool were the only other city in the country to experience a similar rise.
In late September, Mr Donnell commented on the situation, saying to Insider: “The housing market is throwing off mixed signals as the headline rate of price growth slows, yet demand from homeowners using a mortgage continues to increase.”
He also added that, despite the confusion caused by Brexit, demand from mortgaged homeowners was persisting and this was supported by “low mortgage rates, high levels of employment, and households who want a home”.
Towards the end of 2019, Aberdein Considine carried out a major poll to find out homeowners’ feelings. It showed that 50% of Scots fear their property’s value will decrease in 2020 after Brexit.
Aberdein Considine’s managing partner, Jacqueline Law, said: “There has, over the third quarter of the year, been a sharp increase in the number of Scots who fear that Brexit will result in the value of their home decreasing.
“There is clearly homeowner anxiety around Brexit, but this has yet to be reflected in sales figures, perhaps due to the greater public having little idea what Brexit will actually look like.”
According to their “Property Monitor Report”, sales in Scotland reached £5.3 billion towards the end of 2019. Furthermore, their data showed Aberdeen also figured as a new hotspot. Here, the value of property changing hands increased by 4.4%.
Looking ahead to the next five years, UK house prices are expected to rise by an average of 15.3%. According to Savills report, there will be significant regional differences across the nation. For example, London’s property market will keep experiencing difficulties. There, the growth will be of only 4% across the entire five-year period, while in 2020 it will even be negative with an expected change of -2,5%.
On the other hand, things appear to be more positive for Scotland, especially in Glasgow, Edinburgh and the north-east of Scotland. Here the property market is due to experience a total increase in house prices of 19.9%, going from a value of £131,000 in 2019 to £157,000 in 2024. But in 2020, growth will be only 1.5%.
In other words, while the prospects for the next five years appear to be much more positive than during the last decade, in 2020 housing market growth will still be modest.
The experts’ community appears to be divided on whether Brexit will impact positively or negatively on the next year. Some believe the recent Conservative election win may have brought more certainty and that in the next few months it will release pent-up demand supported by low-rate and low-deposit mortgage deals. In fact, some mortgage lenders are currently maximising affordability by lending on 40-year mortgage terms. This way borrowers can lower their monthly repayments.
Managing director of Halifax, Russell Galley, commented that the property market future looks “a bit brighter”.
However, other experts also believe that Brexit on 31 January and the possibility of a second Scottish independence referendum (IndyRef2) will remain a major preoccupation. According to them, these will slow down the recovery process of the property market and they expect the prices to grow very modestly in Scotland.
The EY Item Club’s chief economic adviser, Howard Archer, said: “There will still be appreciable uncertainties, including on the Brexit front, so that the upside for house prices in 2020 is likely to be limited.”
Substantially “a bit brighter” yet still a “challenging 2020” is the best way to describe the immediate future of the house property market. Only after a good two or three months will experts be able to make more accurate and certain predictions. As with all political changes, everything will depend on how the government and local authorities such as Aberdeen City Council will be able to respond to and handle the situation.