House prices in Aberdeen fell 1.3% in 2022 but homes in Aberdeenshire grew 4% in value, new figures show.
Property giant Savills said sales volumes rose in the Granite City.
But the decline in value left average prices 26% off their peak of 2015.
Aberdeenshire prices continued to pick up, despite a drop in sales volumes, and are now just 2% less than their peak in 2015.
It’s been a rollercoaster of a ride…, with lifestyle choices driving demand then economic shocks putting downward pressure on the market, including in the north-east.”
Faisal Choudhry, Savills
Savills held its annual Scottish Property Outlook – Aberdeen event at the Marcliffe Hotel and Spa at Pitfodels yesterday.
Faisal Choudhry, the firm’s head of residential research in Scotland, delivered his latest analysis of local markets to 200 property professionals, developers and investors.
Is the trend for country living over?
He reported “demand shifting towards homes in urban areas that are close to local services and places of work”.
This marks a reversal of a recent trend for people seeking homes with more space in rural locations in response to the Covid pandemic.
Aberdeen is benefitting, with sales in the city showing “continuous recovery” since 2020, guests were told.
Mr Choudhry also reported an expected 1.4% increase in average house prices in the city over the next five years, compared with growth of 9.5% throughout Scotland.
The Aberdeen market will be “more subdued” due to “modest economic recovery and lingering high levels of mainstream stock”, he said.
Granite City house prices are now “adjusting” after several years of outperforming the wider Scottish market, Mr Choudhry said.
The equity-driven “prime” market of homes worth £400,000-£600,000 is driving change, he added.
Luxury homes in demand
Upmarket areas like Bieldside, Cults and Broomhill “performed particularly well” last year, he said.
He continued: “Aberdeen’s prime residential market tends to be driven by equity rather than debt.
“Whilst it won’t be completely immune to the economic pressure facing the wider market, price adjustments are likely to be less severe.”
The Aberdeen market was also boosted by healthy sales of homes worth more than £1 million last year.
There were 29 of these – the biggest annual tally for seven years – during 2022 in a north-east market taking in Moray, Angus and Tayside, as well as Aberdeen city and shire.
Mr Choudhry said house prices across Scotland at the end of 2022 were 20% higher than before the pandemic,
Sales outperformed the pre-pandemic market until October, before the mini Budget and subsequent mortgage market disruption, he added.
He continued: “It’s been a rollercoaster of a ride…, with lifestyle choices driving demand then economic shocks putting downward pressure on the market, including in the north-east.”
‘Cause for optimism’
“Our most recent survey suggests a more positive long-term outlook among buyers across the UK.
“And the fact 14% more buyers registered with Savills to buy a property in the north-east last year, compared to before the pandemic, also provides cause for optimism.”
Experts expect the Bank of England base rate of interest to hit 4% in the coming months and stay at that level until the end of the year.
Mr Choudhry said: “Beyond 2023, subject to inflation being tamed, we expect an improvement in mortgage affordability which will gradually bring more buyers into the market.
Fiona Gormley, head of residential for Savills in Aberdeen said: “Whilst we anticipate a price sensitive market this year, established patterns of hybrid working are upholding the demand for more space in both city and country areas, including a separate space to work.
“In addition, the cost of refurbishing a home has risen significantly over the last few years, with a rapid rise in the price of materials and labour.
“Consequently, well-presented properties tend to be in greater demand. Meanwhile, given the rapid rise in utility bills, the energy efficiency of a property is now higher up buyers’ requirements.”
Reporting another regional trend, Ruaraidh Ogilvie, head of residential for Savills in the north-east said: “The number of properties we have sold to buyers from outside Scotland has increased by a third, compared to the period before the pandemic.”