December 14, 2022
Wondering if that Aberdeen property you’ve been checking out is ripe for investment?
The Granite City hasn’t had an easy time of it. The oil crash of 2014 badly affected Aberdeen, dependent as it was on offshore industries, and this had an immediate effect on property values across the area.
It’s been a long, slow climb back; but climb back it has, and while I wouldn’t claim that Aberdeen is now the shining star for property investment, it is increasingly looking like a solid, longer-term investment opportunity.
As a buy-to-let property professional, I’m going to take a look at the market for investors in Scotland’s third city and why, with a bit of care and attention, it could represent an ideal investment for anyone looking for longer-term returns.
Oh, just in case you missed the reference in the title, Wiki offered this gem under the heading of nicknames for the city!
‘Furry boots City’ – ‘This is a humorous rendering of the Doric, far aboots? (“Whereabouts?”), as in Far aboots ye fae? (Whereabouts are you from?)’
Boom to bust and back again
Since the dark days of 2014, Aberdeen has been clawing its way back, and the recent announcement of a new tranche of oil and gas exploration licences will have raised spirits in the North East.
Aberdeen is also amongst the front runners to win Green Freeport status. The consortium behind the bid claims that it could generate 32,000 new jobs and £8.5 billion in revenue within a decade.
According to the Scottish Government, the bid window is closed and a decision is expected soon. It’s unfortunate for all the hopefuls involved that ‘soon’ appears to be a rather flexible timescale.
It’s reasonable to expect that the new licences and Green Freeport status, if awarded to Aberdeen, will deliver a serious fillip to the city’s economy. Even without freeport status, increased oil and gas activity will deliver a much needed boost.
It doesn’t require a crystal ball to realise that either of these two events are likely to drive up demand for workers and therefore accommodation. If both come to pass, property investment in Aberdeen stands to both benefit and expand.
It’s not all cheer it would appear. Aberdeen Live reported that the city was ‘the worst area in the uk to invest in property’, although it’s worth noting that the gloomy analysis was based purely on retail property prices, and little else.
Given recent history as mentioned previously, this isn’t a surprise and Aberdonians (and it seems their reporters) can be a little dour at times!
Investment opportunities in Aberdeen
It’s as well to mention at the outset that doing your homework will reap benefits. I know that seems obvious, but when considering a property investment in Aberdeen, some of the areas outside the city centre are also worthy of your attention.
Citylets is a good place to start for an overview of property activity in the market, and their third quarter report is useful. Average rents for a 1 bedroom property in the city are £476 pm, 2 bed £690 pm, 3 bed £991 pm and 4 bed £1,599 pm. The average time to let a property is currently 30 days.
Property Investments UK’s report on the market in Aberdeen usefully highlights various areas by postcode which they feel are worthy of consideration. This backs up the earlier comment about looking further afield.
While Aberdeen is a sizeable city, it appears that many residents are willing to live beyond the city centre and tolerate a longer commute. Bear this in mind when looking for investment opportunities.
In August 2022 the average price for a property in the city centre was £149,861 which was a 0.7% increase against 2021. In the surrounding areas the average price has gone up 4% in the last 12 months and currently stands at £203,783.
The presence of the university also brings potential, both single occupancy and house of multiple occupancy (HMO). We wrote about the ‘Pros and cons of HMOs’ back in 2021. If you’re new to this, it’s worth a look.
HMO properties can deliver a higher yield than single occupancies, however they come with different challenges and you should be sure that you are willing and able to accept them.
Advice from the property pros
Aberdeen is a beautiful city, in a particularly lovely part of Scotland, the north east. Yes, it has more than its share of heavy industry in the shape of the oil and gas businesses, but it also has great history and culture.
I make no secret of the travails that the property market up there has suffered, however with the possibility of an uplift in oil exploration and the potential of Green Freeport status, the city is again moving in the right direction.
Aberdeen university was recently rated as the 13th best in the UK, and given the competition for places, this may increase the number of students willing to head to the north east.
That could make HMOs a better bet than has been the case recently.
That, allied to the size of this university city, may just tempt you to consider it ahead of the obvious stars at either end of the central belt. Both Glasgow and Edinburgh are enjoying high property prices; in Aberdeen the same money goes further.
If you’re happy with a longer term strategy, prices in Aberdeen may be attractive to you. Many feel the key to investing in property in Aberdeen is to get in now before prices increase further.
I’ll mention the ‘H’ word again: homework. Understanding the market in and around Aberdeen will go a long way to avoiding pitfalls, and compiling a strategy for your investment will give you a touchstone to judge performance against.
In summary…
Thank you for reading this far, I hope it’s been informative and useful. As specialists in buying and selling tenanted properties Portolio is ideally placed to discuss your goals with you.
We have extensive experience in the Scottish buy-to-let market and we’re always happy to take time to discuss options and plans with landlords and prospective landlords.
So, if you’d like to know more about Aberdeen’s investment potential, or opportunities anywhere in Scotland, give us a call for impartial, professional advice.
Written by Chris Wood, MD & Founder of Portolio
Get in touch on 07812 164 842 or email chris@portolio-user
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