Job Losses in the Oil Sector Causes Property Prices to Drop in Scotland

Oil driller in the middle of the sea

New research carried out by marketing services company Experian shows that Jobs supported by the UK’s offshore oil and gas industry are under severe strain because of continued low oil prices.

Many companies have been struggling under the weight of a sustained fall in the price of oil.

One company, Brent crude is currently trading at about $50 a barrel. This is less than half of what it was trading during 2014.

It is estimated that by the end of 2016 job losses could reach up to 120,000.

How does this effect property prices in Scotland and which cities is it more noticeable in?

Oil rich places are getting the brunt it, namely cities like Aberdeen and surrounding coastal towns.

Aberdeen, once a property investors dream is now suffering greatly from the reduced oil prices. As local markets slump and property gets cheaper it simply does not make sense for property investors to put their money into the city in its current climate.

Scottish Property Federation (SPF) director David Melhuish said that once the drop in interest and prices started it was inevitable that investors who previously saw Europe’s energy capital as their best bet for UK investment outside London, would be more cautious about Aberdeen in the current climate and that property development in the Granite City is so closely linked to the cyclical nature of the oil and gas industry.

Furthermore, an industry report from the Bank of Scotland found 43% of companies are planning further potential job cuts.

In fact, it has been found that Aberdeen is the only major city in 20 to see an annual house price drop.

The study of 20 major UK cities, shows that average house prices in the Granite City has fallen by three per cent to £188,000 in the year to March 2016. In the year to February, prices fell by 1.6 per cent.

Aberdeen house prices

The analysis was carried out in the form of a hometrack survey.

What does this mean for Aberdeen?

Well, Faisal Choudhry, Savills Scotland’s head of residential research said the drop off has occurred after seven years of “phenomenal growth“.

He further went on to say:

The market in Aberdeen below £400,000 is relatively active and there is high demand for attainably priced housing, especially for public sector employees. Future infrastructure projects as part of the local City Deal will improve the local economy and connectivity with the rest of the country.

It’s difficult for anyone to judge how long this oil slump will last but for now it’s better to be cautious and wait to see how things unfold over the next year.

Comments are closed.