Aberdeen Area Guide
Property Investment in Aberdeen
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Property Investment in Aberdeen
This property investment guide examines Aberdeen on the north east coast of Scotland. The country’s third largest city by population, it is home to many of Scotland’s biggest and most successful businesses.
Once associated with the offshore oil and gas industries, Aberdeen is making a transition towards renewable energy and carbon-capture. This, in turn, is creating new opportunities for growth as the world’s economies pursue their Net Zero agendas.
For investors, the prospect of more jobs in higher-paying and more ‘future-proof’ industries is important. It should help to boost demand for higher quality accommodation and, crucially, people’s ability to pay for it. Moreover, billions of pounds are now being funnelled into Aberdeen, creating yet more jobs and creating the foundations for ongoing growth.
In this guide, we’ll consider how these and other factors have been creating steadily improving conditions for property investment. We will examine those factors under the following broad headings:
Strategic Position
Aberdeen’s Economy
Population and Demographics
Economic Data
Regeneration and Inward Investment
The Education Sector
The Aberdeen Housing Market
Property Market Predictions
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Why Invest in Property in Aberdeen?
A Summary
Until recently, Aberdeen was not regarded as an especially appealing property investment market. For a number of years, the slow decline of the fossil fuels industry prompted the inward migration of workers to stall. Average earnings stagnated and property values slowly diminished.
However, fortunes change and 2023 is shaping up to be a year of opportunity: a time when average values are unusually low but, potentially, set to begin a steady ascent. A robust recovery is a realistic prospect for numerous reasons. Besides the rise of the renewables industries, examples include:
A steady shift to other high-value, high-tech sectors
Massive inward investment and regeneration schemes
A growing student market
We’ll explore these various issues in more detail later on. In more general terms, however, the coincidence of so many positive forces is likely to create more jobs, kickstart new economic growth and, ultimately, build local demand for good quality homes.
These trends are certainly beginning in Aberdeen, and the scale of ongoing regeneration projects suggests that they will only gain momentum in 2023 and beyond.
Aberdeen’s position on the North Sea coast has been one of its greatest strengths, establishing the city as one of the UK’s principal gateways to offshore oil and gas reserves. This attracted major employers, which then spawned extensive supply chains.
More recently, that same location has made it a natural base for the development of offshore wind and other renewable energy industries. Huge sums have already been invested in associated infrastructure schemes, and there is much more to come.
The city’s location also makes it attractive to tourists. For those drawn by history, sports, countryside and outdoor recreation, Aberdeen boasts a wealth of local attractions. Examples include:
· Aberdeen Beach
· Museums, art galleries, cinemas and theatres
· St Machar’s Cathedral
· Aberdeen Science Centre
· Golf courses, leisure centres and sports grounds
· Amusement parks
· Scenic parks and gardens
A little further afield, tourists can visit a wealth of coastal resorts, castles, nature trails and country parks. The Cairngorms begin just 25 miles (40km) to the west.
Strategic Position
The Regional Economy
Aberdeen reportedly hosts a quarter of the country’s top 100 companies. Aberdeen City Council describes the region as “one of the most prosperous parts of the UK.” It draws attention to high levels of skills, earnings and productivity.
This growth will be achieved, in part, by the continuing move towards environmentally sustainable industries. However, Aberdeen is advancing on many fronts, including scientific disciplines, engineering, digital and other high-value sectors.
Economic Data
Economy £18 billion
Economic growth forecast +7.4% by 2025
Population (city) 198,590
Projected population growth +1.1% by 2028
Local Growth Industries
Recent surveys have shown that Aberdeen residents tend to be better qualified than the average UK citizen, and that local employment market features a higher proportion of higher-skilled roles. The presence of such a skilled workforce has helped the city to build a number of high-growth, higher-value sectors. Some notable examples include:
Renewable energy
Life sciences
Digital technologies
Food & drink
Such is demand in these and other growth industries that, according to NOMIS, the ratio of jobs to the total working age population is well over 1.0 in Aberdeen. In other words, there are more job vacancies than workers in the city. This provides strong evidence that Aberdeen is set to attract more residents over the coming years as people migrate towards its various centres of employment.
Regeneration
and Inward Investment
New investment and regeneration is having a transformative effect on Aberdeen. Tens of thousands of new jobs are being created as the city begins to take a leading role on the shift towards renewables, and thousands more will be generated by organic growth in other local industries.
Invest Aberdeen writes that “more than £12 billion of public and private infrastructure investment is due to be delivered over the next decade.”
Some notable schemes are listed below:
Transport improvements (Aberdeenshire)
£4.5 billion
City Centre Masterplan
£1 billion
Aberdeen City Region Deal
£250m capital funding
£868m leveraged investments
Aberdeen Harbour Expansion
£400m
These and other schemes – together with the creation of outlying commercial and industrial parks – should help to support further growth in employment, average earnings and, consequently, people’s aspirations for better housing.
The Aberdeen Housing Market
Average property prices declined over the ten years between 2012 and 2022. The downward trend accelerated with the loss of around 15,000 jobs between 2015 and the start of the 2020 Covid pandemic.
However, those job losses are being more than offset by rapid growth in local industries. The renewable energy market alone is poised to see the creation of more than 200,000 jobs over the next decade, and that’s to say nothing of organic growth in retail, tourism, food, business services and other sectors.
Recent history gives little indication of the potential that lies ahead. Aberdeen is set to become a high-growth city, and a leading centre for one of the most important, future-focused industries in the world today.
Consequently, the city’s low house prices present an opportunity for investors; a chance to secure affordable residential property that should subsequently benefit from strong growth in rental demand, yields and longer-term capital values.
Property Market Data
Average home price (Aberdeen) £142,100
Average home price (UK) £258,100
Average year-on-year rental growth (Aberdeen) +9.7%
Average yields (city centre AB10, AB11 and AB25) 6.7% / 6.7% / 7.0% respectively
Property Market Predictions
UK-wide capital growth forecasts for 2023 are broadly negative. However, many sources expect prices to contract only for a short period, followed by a recovery in 2024. UK-wide, Savills is predicting cumulative price growth of +6.2% by 2027, but it expects Scottish properties to fare better, appreciating by +9.5% over the same period.
Summary
After ten years of rather lacklustre performance, Aberdeen is well placed to perform well when the British economy starts to rebound. A large and successful private sector, huge levels of inward investment, a growing population and a highly skilled workforce should provide an excellent foundation for further improvements in employment and earnings. That, in turn, should support better investment returns in terms of both rents and capital values.
For these reasons, Aberdeen could well prove to be one of Britain’s fastest-improving and high-yielding buy-to-let markets in 2023 and beyond.
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