What's The Position Of The Aberdeen Market?

[ccc]

you're not going to set up your HQ in Angola when the concentration of experienced engineers is in Aberdeen.

So they have always been in Aberdeen ? No - they were somewhere else before that.

Just wise to remember that in the longer term.

Certainly seems like there is a lot of work in the near future though.

[Torryloonmadegood]

Hi,

My last employer was based in Aberdeen but 75% of their production was in West Africa likewise 60% of my current employers production is outwith the North Sea.

I take the point about the industry being based elsewhere before Aberdeen but to be honest the contractors, who employ the largest proportion of the industry have been through so much consolidation in recent years that the regional players of old no longer really exist.

Rates in Aberdeen are being pushed upwards by global not specifically North Sea demand. Aberdeen companies are competing for staff on a global basis.

In the subsea installation sector, there are now essentially two global players both Aberdeen based. There remain a number of regional players but the big two service over 70% of the global market maybe more now with the merger of Technip and Global Industries a couple of weeks ago. The North Sea is still a significant revenue stream for these companies but the majority of the turn over and the overwhelming majority of the profit is derived overseas so even if the North Sea closed tomorrow they would remain. The skill pool is here and skilled hands in short supply.

Without wishing to sound arrogant just to illustrate the point, today, out of the 4 e-mails from agents 3 were for overseas positions.

[Key Stakeholder]

http://www.newscientist.com/article/dn21031-carbon-bubble-could-threaten-markets-maybe.html

After the dot-com bubble and the property bubble, prepare for the carbon bubble. Entrepreneurs meeting in the Maldives last week warned that shaky assumptions about future fossil-fuel use are buoying financial markets and that the collapse of this "carbon bubble" could trigger another crash one day.

"There is this suicidal river of capital flowing into fossil fuels," says Jeremy Leggett, a green entrepreneur and head of solar power company Solarcentury, based in London. "Let's get the risk acknowledged."

[Torryloonmadegood]

Interesting analysis, unbiased ? Selling solar energy..........

The fundemental problem with all renewables is that they are, currently at least, utterly uneconomic in comparison to hydrocarbons without massive subsidy. How much would oil have to be to reach a break even point....200, 300, 400, 500 USD ?

The governments commitment to renewables costs a fortune, well, wastes a fortune in my opinion. I worked on a project that had a capital repayment of 80 years, yep a human life time just to repay the CAPEX, if the wind was steady and always at the optimal strength....given the towers and turbines only had a 25 year design life they would never have been installed on a "normal" commercial basis.

However, renewables keeps lots of engineers busy in Aberdeen through on the same day-rates as oil and gas so no real complaints other than our tax wasted.

[Key Stakeholder]

Interesting analysis, unbiased ? Selling solar energy..........

The fundemental problem with all renewables is that they are, currently at least, utterly uneconomic in comparison to hydrocarbons without massive subsidy. How much would oil have to be to reach a break even point....200, 300, 400, 500 USD ?

The governments commitment to renewables costs a fortune, well, wastes a fortune in my opinion. I worked on a project that had a capital repayment of 80 years, yep a human life time just to repay the CAPEX, if the wind was steady and always at the optimal strength....given the towers and turbines only had a 25 year design life they would never have been installed on a "normal" commercial basis.

However, renewables keeps lots of engineers busy in Aberdeen through on the same day-rates as oil and gas so no real complaints other than our tax wasted.

Oh, I see. You discount the cost of damage done to the atmosphere, then?

[Key Stakeholder]

But that's not really the point. The question is: Does the energy bubble make Aberdeen different? Is there an energy bubble? Are "suicidal flows of capital" into energy businesses in Aberdeen (be that either filthy-atmosphere-destroying-carbon-energy or subsidy-junky-low-bang-per-buck renewable energy) buoying that town's domestic property market into a secondary hyperbubble. House prices in that town are almost twice those of similar towns elsewhere in the UK (Cardiff for instance, which is a much nicer place, better connected, not so grey, capital city, cultural centre, on the motorway network, 2hrs to london on HST, proper international airport, opera house, etc etc).

Torryloonmadegood appears to confirm the fact that, indeed, there is an energy bubble - the market for capital in the energy sector having detached itself from fundamentals. So thanks for the example, Torryloonmadegood.

So, the supplementary question (the question which almost doesn't need asking) is:

In Aberdeen, where domestic property prices are supported by a bubble market in energy capital, what happens to the property market when the industrial bubble market supporting it collapses?

To ask the question is to answer it.

[Torryloonmadegood]

Yep, its no-doubt a bubble, however its lasted a generation and a half to date for Aberdeen and will no doubt see the present generation of new graduates to their retirement perhaps not at the current level of intensity but a good living none the less with skills in demand internationally if they chose to be mobile.

Has it been a good thing for the city and shire well .......I guess it depends on which side of the fence one sits.

Of the total waged in Aberdeen and Shire a quick googling suggests that 5% are directly employed by the oil companies and major contractors and a further 18% indirectly employed within the overall oil and gas supply chain, there are apparently a further 6% making a living from the direct spend of the foregoing 23%.

For the remainder of the population it must be a nightmare having being priced out of anything aspiration or even desireable more than 20 maybe even 25 years ago hence the two markets in Aberdeen.

Imagine competing in a city where the average weekly wage in Abedeen (a smidge over 600 GBP) was the day rate of a significant minority !

And even at the bottom end of the market, its compounded by many day rate contractors buying to let instead of pensions through their Ltd Co's pricing out those on average wages.

It will burst at some point, I thought it would a couple of times but Aberdeens proved resiliant to date.

[Key Stakeholder]

I guess it depends on whether you can discern between affluence and wealth.

[Torryloonmadegood]

Yep, or how much of their disposable they assign to wealth creation, their concept of what is wealth and the vehicle they choose.

A house purchase wouldn't be considered a wealth creation exercise by many in the current climate however it can simply be for the pleasure of ownership.

The point being that affluence gives choice, Rubislaw South in an aspirational home or Deswood Place with an aspirational lifestyle, how much do you value a decent education for your kids and access to instant healthcare, all part of the choices to be made !

They are many in Aberdeen that have choice due to their disposable income however unfortunately there are many others without choice competing with the spend of others, therefore the two markets in one city and why west end granite continues to move, at prices utterly unwordly for more than half the population.

[Key Stakeholder]

Is "disposable [income]" a prerequisite for wealth creation?

Is RoI the same as wealth creation?

Is wealth truly measured by digits?

Is aspiration solely linked to acquisition?

I guess it depends on whether you can discern between price and value.

I guess it depends on whether you understand that costs are not always monetary.

[rookie]

Is "disposable [income]" a prerequisite for wealth creation?

Is RoI the same as wealth creation?

Is wealth truly measured by digits?

Is aspiration solely linked to acquisition?

I guess it depends on whether you can discern between price and value.

I guess it depends on whether you understand that costs are not always monetary.

That kind of thinking is alot easier when you are sitting in your own house that your paying off, and not in some 1 bed flat costing you £700 a month rent

Theyve been saying the North seas is dead sindce the early 90s

Keep on repeating that sentiment, keep holding out for a house price crash, maybe in 25 years time that might happen, but those that have bought even at the top of the boom will have paid the mortgage off by then, had 25 years living in their own home and will have an asset, what will the renters have?

[Torryloonmadegood]

what will the renters have?

25 years in magnolia rooms .........

[Torryloonmadegood]

Only joking but theres a serious point in that theres sufficient financial support and desire at the top to sustain that market.

However flats in the city centre and hutches in the suburbs are struggling due to over supply. Its worth considering the said 700 a month of a one bed flat, in Torry its about 500-550 for a one bed, however they only cost 75k ish so about a 7% return gross assuming 525 GBP/month and 10 months rental per annum not bad if you've a few quid devaluing in the bank.

I really believe the stagnation will continue until there is a major hike in interests rates.

[ccc]

If I was earning a serious wad in Aberdeen and wanted to buy a house ? Would just stay in a room or at a pals/family for the number of years it takes to save up to buy outright. Seems from the chat that you could end up working abroad for a lot of that as well. Or at least offshore for a large amount of that time. I wouldn't see the point of buying somewhere unless it was decent value.

[Torryloonmadegood]

For most people, depends if you are regional or international based for oil company and major contractor employees.

For others its a mixed bag really and more opportunistic, I started offshore out of Aberdeen in 1980 survived the 86 crash that had americans handing their keys back on the way to the airport, went overseas in the early 90's, London for a couple of years, back to Aberdeen office based 96 to 2001, back overseas for 9 years expat...........now home and thankfully in the home straight to retirement !

The oil industries given me and many others the opportunity to earn a decent income without any unemployment over thirty years.

Unfortunately many people not in the industry tried to keep up and saddled themselves with serious debt, I've a mate, a sparky, own business, with a 9x liar loan mortgage, unbelievable but true.

It will be interesting to see what happens over the next few years, the Aberdeen economy can be contra-cyclic, certainly during the early 80's recession Aberdeen was booming, likewise during the 90'S recession, Aberdeen crashed during the late 80's London boom and was quiet during the early 00's......this time ?

Aberdeens booming at the moment with stacked projects getting sanction left right and centre which will keep the next two or three years at least busy for a large minority of the city and shire working population.

It will be a long time waiting if you want to get into west end granite for Bridge of Don money.

[Alba]

For most people, depends if you are regional or international based for oil company and major contractor employees.

For others its a mixed bag really and more opportunistic, I started offshore out of Aberdeen in 1980 survived the 86 crash that had americans handing their keys back on the way to the airport, went overseas in the early 90's, London for a couple of years, back to Aberdeen office based 96 to 2001, back overseas for 9 years expat...........now home and thankfully in the home straight to retirement !

The oil industries given me and many others the opportunity to earn a decent income without any unemployment over thirty years.

Unfortunately many people not in the industry tried to keep up and saddled themselves with serious debt, I've a mate, a sparky, own business, with a 9x liar loan mortgage, unbelievable but true.

It will be interesting to see what happens over the next few years, the Aberdeen economy can be contra-cyclic, certainly during the early 80's recession Aberdeen was booming, likewise during the 90'S recession, Aberdeen crashed during the late 80's London boom and was quiet during the early 00's......this time ?

Aberdeens booming at the moment with stacked projects getting sanction left right and centre which will keep the next two or three years at least busy for a large minority of the city and shire working population.

It will be a long time waiting if you want to get into west end granite for Bridge of Don money.

Despite all the above this is a surveyor / valuer's statement in the HIP report for a property that went on sale today:

"There is currently a low level of transactions in the housing market, however, demand does exist and sales are

taking place".

[Key Stakeholder]

As I mentioned earlier, costs are not always monetary...

Paul Theroux, "The Kingdom by the Sea"

The average Aberdonian [is] a person who would gladly pick a penny out of a dunghill with his teeth

And earlier this year, a local Aberdeen newspaper reported:

Oil capital only UK city to increase contribution to national economy during recent recession: Oil and gas business helped Aberdeen outshine the UK’s leading cities on a key measure of economic growth as Britain hurtled into a recession, new figures show ... Peers among [the] top 10 cities for GVA were unable to match Aberdeen’s achievement of faster growth, with all nine seeing a slowdown as the UK lurched into a deep recession in the wake of the credit crunch.

(my emphasis)

Unsurprisingly, the Aberdeen press fail to point out that the same phenomenon of high oil and gas prices has been elsewhere a major source of price inflation, a break on recovery from recession and a sink for wealth - draining it from economies and communities throughout the entire country and wider world. For the vast majority of people, high prices for necessities are unquestionably bad news. The phenomenon which delivers affluence for a relative handful of hubristically acquisitive Aberdonian hydrocarbon insiders (who mistake that affluence for wealth, and then go on to confuse acquisition with aspiration and so are happy to trumpet bubble-prices for housing in Aberdeen) is the self-same phenomenon which simultaneously impoverishes the living standards of all others here and elsewhere through high prices for energy, food, clothing and transport.

But it's that use of the word "achievement" in the local paper report which is most telling (and troubling). For in what way can a price surge in an internationally-traded commodity possibly be claimed as "Aberdeen's achievement"? Now, of course its an ill wind that blows nobody any good and, in this case, the Aberdeen-based oil and gas industry just happens to be the recipient of that 'good'. But, to extend the metaphor, this is just economic 'weather'. Certain types of Aberdonian - the ones we see, hear and read the most of (more's the pity) - are fools to allow themselves to be seen to be revelling in something so whimsically changeable. Worse, they are bloody idiots to allow their local press to suggest that the town can collectively take credit for it. It is not something for which anyone should want to claim credit, because worst of all this "I've got mine" hubristic streak is in poor taste as the rest of the world suffers the effects of high oil prices. As hunger prompts political revolution and military instability in the maghreb, as economic contraction forces hundreds of thousands of young people onto the dole at home and as the #occupy movement spreads through the towns and cities of the west - the oil-people of Aberdeen are happy to tell you that they're better than OK - they're "making hay" and "reaping the benefits" because "Aberdeen's booming". Yeah; booming, as a handful of its inhabitants do ever more damage to the atmosphere at highest-ever record prices. As those highest-ever record prices do ever more damage to the economy.

Costs are not always financial, and hubris tempts the gods.

[Torryloonmadegood]

ROTFL..............brilliant !

[Key Stakeholder]

Cristopher Brookmyre, A Big Boy Did It and Ran Away

Europe's Oil Capital. Honestly. The first time he heard the expression, he'd assumed it was a bit of self deprecatory humour. That was before he learned that there was no such thing as self-deprecatory humour in Aberdeen, particularly when it came to the town's utterly unfounded conceit of itself. It was a provincial fishing port that had struck it astronomically lucky with the discovery of North Sea oil, and the result was comparable to a country bumkin who had won the lottery, minus the dopey grin and colossal sense of incredulous gratitude. The prevalent local delusion wasn't that the town had merely been in the right place at the right time, but that it had somehow done something to deserve this massive good fortune, and not before time either.

[Torryloonmadegood]

Classic....do you copy and paste for a living lol

[Unexpected]

Classic....do you copy and paste for a living lol

I think he's suggesting that if you hadn't been in the right place at the right time you might not have made so good.

[Key Stakeholder]

I think he's suggesting that if you hadn't been in the right place at the right time you might not have made so good.

I'm also hoping to suggest that the 'costs' to those for whom of the accumulation of affluence is the primary aspiration are greater to them (as well as to others) than they acknowledge - even to themselves.

But hey, that's tough to take.

[Torryloonmadegood]

Hilliarious,

Are you suggesting that we order our society in a different way, perhaps where money isn't the differentiator ?

Aspirational houses for those with the greatest contribution to society perhaps......medical researchers in Rubislaw South, Heart Surgeons in Devonshire Road.........McDonalds Managers where....Menzies Road ?

A proper degree would seem to be the key in both scenarios, perhaps with a bit of work ?

Funny how the harder you work the luckier you become, just a thought.

However it doesn't cure the wider issues for those that are "unlucky"....retraining ? working harder ? realising that you work for yourself and your family rather than expecting everything on a plate ?

[Key Stakeholder]

Hilliarious,

Are you suggesting that we order our society in a different way, perhaps where money isn't the differentiator ?

Aspirational houses for those with the greatest contribution to society perhaps......medical researchers in Rubislaw South, Heart Surgeons in Devonshire Road.........McDonalds Managers where....Menzies Road ?

A proper degree would seem to be the key in both scenarios, perhaps with a bit of work ?

Funny how the harder you work the luckier you become, just a thought.

However it doesn't cure the wider issues for those that are "unlucky"....retraining ? working harder ? realising that you work for yourself and your family rather than expecting everything on a plate ?

Wow. Never have I been more comprehensively (wilfully?) misunderstood. I'll need to work on increasing the pellucidity of what I say. Remember what I said about cost externalities?

Sir Nicholas Stern, speaking at the Royal Economic Soc. in Nov '07

The problem of climate change involves a fundamental failure of markets: those who damage others by emitting greenhouse gases generally do not pay… Climate change is a result of the greatest market failure the world has seen. The evidence on the seriousness of the risks from inaction or delayed action is now overwhelming. We risk damages on a scale larger than the two world wars of the last century.

Were oil industry externalities monetised, less of a bubble would be seen. But no, these cost externalities are instead socialised. And (as we all pay for their social, environmental and ecological effects) the oil industry - and, by extension, the Aberdeen property market - is the beneficiary of a vast socialistic subsidy. Therefore, for someone who's 30-year oil industry career has been subsidised by the socialistic absorbtion of the unmonetised costs of this market failure to complain of others "expecting everything on a plate" is more than just a little bit dissonant.

I clearly call for full cost accounting. Quite the opposite of social engineering. Is that so difficult to understand?

Upton Sinclair, author of "Oil!" (filmed as "There Will Be Blood")

It is difficult to get a man to understand something, when his salary depends upon his not understanding it!

[Torryloonmadegood]

Yep, whatever........I sympathise, career choices are always difficult, our needs and aspirations change over time, many jobs while worthwhile in our 20's just don't meet the material needs later in life..

Some are lucky eh ?

Anyway, state of the Aberdeen Market, a frends son puts his one bed Rosemount flat on two weeks ago at o/o 120k based on a home valuation report of 125k, he accepted 130k with a quick entry last week after 9 days. Lovely flat renovated with quality materials and well located/layed out.

So still movement and demand even at the low end if the right buttons are pressed.