The McGlashan

Interestingly, and tellingly, Hamish, the employment examples you give are largely for managerial or assistant managerial posts. While you are clearly intelligent, articulate and insightful, your own position seems to have endowed you with a blind spot as to what general employment in the whole economy actually consists of. Basically, you are saying "let them eat cake!" Similarly, you appear blind to the meaning of low interest rates and the danger which they are an increasingly desperate bid to outflank: the BOE is closing in on a US- or Japanese-style ZIRP as a second-to-last-gasp anti-deflationary policy. The danger of deflation is most acute for debtors like yourself, as the real value of your outstanding loan will increase as price and wage levels in the whole economy decrease. Your only hope is not for interest rates to remain low (or zero) implying deflationary pressure on the economy, but for Benanke, King et al to start up their 'quantitative easing' helicopters and tip the situation into an inflationary spiral, which will inflate away your debt. The risks of quantitative easing are manifold, ranging from currency exchange runs to hyperinflation. If they do it, they'll have to be very careful. Will we see deflation? A quick look at the housing market, the motor dealerships, petrol forecourts, utility bills and the high street might make one think that we're already there. Moreover, we are seeing (semi-)voluntary wage cuts at Corus, JCB, Vauxhall, Davy, CLSA and even Formula One motorsport! Does anyone have any examples from the local economy?

Thanks for that, Euan. Hmm. The BBC report refers to a Bank of Scotland report, which itself references the same ASHE survey which I referred to. I have given the averages for gross pay for all employment in Aberdeen, whereas the BBC/BOS seem to have cherry-picked the figure for male full-time workers only, including overtime. Statistics through the prism of banking via the lens of journalism, huh? :angry: Check it all out for yourself. http://www.statistics.gov.uk/StatBase/Product.asp?vlnk=15187

Hi Hamish, I'd be interested to have sight of your source for your figures for earnings. The most up-to-date I can find are the annual survey of hours and earnings (ASHE) annual sample for 2008 at http://www.statistics.gov.uk/StatBase/Product.asp?vlnk=15187 This year's surveys show mean earnings in Aberdeen at £524 p/w = £27,248 p/a. Median at £430 p/w = £22,360 p/a Both mean and median are significantly lower than what you've quoted. Median being a better statistical average than mean, 3.5 x 22360 = £78,260. Not many places you'd like to inhabit in Aberdeen for that money, now are there? Let them eat cake!

Hi Euan, You give a cogent analysis. If we expect a mean-reversion in the market, equitibus paribus that same £200k property will drop to £101k (i.e @3.5 x average wage). However, with the spectre of deflation looming (here already?) it is unlikely that all other things will remain equal. We are already seeing severe downward pressure on wages. I am not going to make predictions about what level property prices will fall to, suffice to say that I'll not be considering buying till 2010 / 2011. Meantime, finding a safe haven for savings is the most pressing concern.

Actually, on the oil price aspect of the discussion and its effects on the Aberdeen property market, does anyone else remember the oil price crash of 1986? I worked in the Halifax Building Soc. at the time, and it was kinda soul-destroying to watch the parades of young families trooping into the branch to be re-possessed. We had burly security chap (he worked the door of Radar's bar in the evening) in the banking hall, as luckless (feckless?) roustabouts could get a bit *lively* when asked to hand back the keys to their Danestone Dunromin'. However, there was no corresponding crash in house prices in Aberdeen, but, then again, the rest of the country was booming. IMHO, this demonstrates that the Aberdeen property market, while (as BJM says) lagging the rest of the market, is not isolated from it. No doubt a number of O&G companies, starved of petrodollar revenue (due to the current oil price) and sterling credit will disappear or consolidate in 2009. Similar revenue and credit problems are affecting all sectors of the economy. It's appropriate to point out that it's not marginal unemployment which affects house prices, it's the availability of credit. We did not have a house price boom, we had a credit boom - the unsustainable rise in house prices was merely a symptom of this boom. The house price crash is similarly a symptom of the bursting of the credit bubble. No doubt families will face the consequences of arrears on all forms of credit as opportunities to rollover disappear. This is no different from what is happening throughout the industrialised world. The Aberdeen market will follow the UK house price crash, no matter what the oil price does. The current oil price crash is dramatic, no doubt, and will have an effect on sentiment above and beyond fundamental factors in Aberdeen; it may precipitate a faster property crash than in the rest of the UK if sustained well into next year. Will that be the case? Dunno. For certain, however, is the fact that the oil price will boom again, and crash again, and boom and crash. A great deal of sensible analysis is here: http://321energy.com/editorials/cohen/cohen122008.html But, really, all you need to know is in the attached graph. Rather than short-term volatility in the oil price, a far greater medium-term concern to all who rely on the UKCS for their employment should be the geological certainty of the precipitous decline in production, which at 12% yoy since 2001 is the steepest of any oil-producing province. In the long-term, there will be very little oil & gas activity in the UKCS. But, then again "in the long term, we're all dead".

Now, where have I heard that before?

"Your future dream / Is a Shopping Scheme"

Aha! So now we know why Sir Ian is so keen to diversify into cafés and car-parks! http://www.eveningexpress.co.uk/Article.aspx/974213?UserKey=

Good Grief! That was a quick 2 months....

I would hesitate to associate the words "successful business man" with Trump. He did not make his money, he inherited it from his Father. There's not much left. More here: http://www.independent.co.uk/news/world/am...es-1047081.html and here http://blogs.wsj.com/wealth/2008/12/03/is-...-trouble-again/

Thanks for the info, I hope it turns out OK for you DBP. From my own experience, getting ejected from the oil industry (for my, em, fringe views) was the best thing that ever happened to me - good luck to you. On the Trump thing, I have been following his difficulties in Chicago, problems getting re-financed from Deutsche Bank etc. http://online.wsj.com/article/SB122523704293478077.html Similar issues apply to his condo development in Baja California http://www.forbes.com/forbes/2008/1117/034a.html I have attempted many times to bring this to the attention of the EE and P&J bulletin boards and have been BANNED for my efforts. This is Trump's established way of doing business. It seems, IMHO that he is not so much a successful property developer as a successful self-publicist and bankruptcy negotiator: He blows into town with grandiose plans. Sets up a development company, runs it into the ground, gets banks and local authorities to bail him out and re-patriates the profits to his privately-owned holding company in NYC which is a separate legal entity from the bankrupt concern. http://select.nytimes.com/2007/07/06/business/06norris.html http://query.nytimes.com/search/sitesearch...&srchst=cse It looks very much like his casino and entertainment concern is about to go bankrupt for THE THIRD TIME. From friday's NYT. http://norris.blogs.nytimes.com/2008/11/28...-trump-casinos/ From the comments: "Any one who invests in this braggart, this poser, is a masochist." Aberdeen City and Shire is that masochist. So, I don't doubt that the Trump development will go ahead, it's just that we will end up paying for it. :angry: A quick look at the share price of Trump Entertainment is eye-opening: http://newsvote.bbc.co.uk/1/shared/fds/hi/...welve_month.stm Trading at USD $0.28 down from USD $5.57 is quite a slide over 12 months. I remember these shares trading as high as USD $25 at the beginning of 2007. The market is trying to send us a message about companies associated with Mr Trump. I believe that we should listen.

Hiya Redhat. I've been banging on about this for quite some time. I'm in a similar position to DBP, but have absolutely no intention of buying before 2010. The more I think about it, and the more I read about it, the more I'm inclined to say that I'll let this drift out to 2012 even. I concluded that reading the runes on ASPC is pretty much pointless for the moment, other than for entertainment: "Look at what this idiot thinks this dump's worth!" I read a lot about capitulation in oil trading, and many comparisons to the oil price crash of 1986. http://321energy.com/editorials/hoye/hoye081130.html Oil is now trading at a price not seen since may 2005, about the start of the most excessive part of the Aberdeen house price boom. The oil-trading bulls have now left the building. Trading on options markets target oil hitting USD $40 in the next two months. I'm genuinely shocked by the speed of this crash. Can anyone see an upside? If so, when? I note that the City and Shire's much touted "Energetica" development corridor plans are largely predicated upon USD $100 oil. What a mistaka to makea. I'd be greatly interested to hear from anyone who knows what effect the oil price crash is having on energy-sector companies here in Aberdeen. Project deferrals? Cost-cutting? Layoffs? Wage freezes? Any news? In related news, I note Shell sold a bunch of production assets to an Abu Dhabi limited company yesterday. Wood Group is to be the operating and maintenance contractor. No net effect on jobs and spending? I don't think so.

Indeed yes, but deflation is nothing to fear for savers. The exchange value of your money-in-the-bank (even at 0%) will be increasing as general prices in the economy fall month-on-month. This is already the case if you have notionally hypothecated cash savings for property purchase. Conversely, deflation is to be GREATLY feared by those with debit balances, whatever form they may take (from mortgages to overdrafts, and all forms of credit) as the real value of those balances will continue to increase, even if interest is being charged at 0%.

Hiya DBP, I have to say I agree wholeheartedly with you. In fact, I would probably go further and suggest that the entire tertiary education system is now calibrated to manufacture pre-indebted worker/consumers who emerge blinking into the labour market with their lives already completely subsumed under capital. I fear greatly for the prospects of the under-30's today, their gilded cages have made it impossible for them to ever analyse their situation.

Indeed, 'tho the local press seems to be in denial about it... http://www.pressandjournal.co.uk/Article.aspx/933617 Despite the optimistic headline, the P&J seems to be whistling past the graveyard. In the article Malcolm Webb admits that 2008 North Sea investment is down £1bn, about 8%, in 2007 and will continue to fall through 2009. He does not address the fact that oil prices are falling off a cliff, choosing only to say that long term price trends will be up. Conveniently ignoring recent Brazilian announcements which could boost S. Atlantic reserves to well over 100 billion barrels. (400% increase)... Bigger than Russia, only Iran, Iraq & Saudi bigger. http://www.brazzilmag.com/content/view/10160/

Redhat, Re. http://www.aspc.co.uk/cgi-bin/public/SINGL...&User=16570 Regardless of cost, you'd be mad to buy there, unless you enjoy looking at (and listening to) major traffic interchanges.

In other news significant to the accelerating Aberdeen house price crash, the current FT Weekend points to $31 for crude. BLACK TREASURE BECOMES FOOLS GOLD http://www.ft.com/cms/s/0/ae6f09cc-a771-11...0077b07658.html "Crude has already cascaded down through a series of important support levels to $64.70... Elliott Wave Theory also suggests that crude’s bear market could terminate in its fourth-wave bottom, between $57 and $50.75. "But while this descent has left Brent Crude looking oversold on a daily and weekly view, monthly momentum has yet to reach the extreme levels that it did at bottoms in 1993 and 1998. "...The price could easily reach $44.59, perhaps $31.54. That seemed unthinkable weeks ago, but the most surprising thing now may be the speed with which this is achieved."

At last, one of my favourite hobby-horses is getting MSM attention: http://www.theherald.co.uk/news/news/displ...the_country.php

Hiya dtl, What forum was that from? It was indeed a well-written good read - wouldn't mind reading more...

Hiya DBP, It's not a matter of being on one particular side or another. It's much more subtle than that. My position is not inconsistent. My pointing out that there are more modes of employment in the North East than the oil & gas industry illustrates that many of us will be well placed to benefit from a house price crash in Aberdeen - no matter what happens to oil & gas. (Notwithstanding the general slump). It has been suggested by many, predominantly BBC Scotland (isn't that Hayley Millar just awful?), that the high oil price has played a significant role in buttressing the housing market in Aberdeen since the onset of the UK house price crash in November '07. My thesis is that this perception has massaged sentiment in the face of obviously contradictory fundamental evidence: large numbers of empty properties all over town. "The market can stay irrational longer than you can remain solvent" - John Maynard Keynes. As you'll have noticed in the media over the last few weeks, sentiment has a great deal of influence in markets. It makes sense, therefore, that if it is perceived by many that Aberdeen has "the Dutch Disease" - over-reliance on one sector - when that sector suffers, sentiment will suffer and reality will set in for the housing market. Therefore - bear market on oil prices = bearish on Aberdeen house prices. Having said all that, I believe that the 'natural' level for oil prices is probably around the USD $80.00 mark. We'll see what OPEC decide upon tomorrow. BTW, who told you that gas prices were still high? LNG contracts are trading at $6.73/btu on NYMEX today - down from a high of around $13 in the summer.

Bear market on oil prices = bearish on Aberdeen house prices.

Oil price now below USD $70.00

... Hmmm. The MSM used techniques like this in an attempt to stem the panic when house price growth started turning negative at the end of 2007 and start of 2008. How long before you have to dig back more than 12 months to show stability? How long before you have to dig back 2 years, 5 years, etc? It is true that Aberdeen has some externalities to factor in, most notably the oil price and the city's geographical isolation. Well, a quick look at the oil price shows that that particular bubble is deflating right now. The city's geographical isolation will work as a negative factor on growth in the absence of other drivers. Just as a physical bubble is an asymmetric process (it is easier to pop one than to rebuild it), a financial asset or credit bubble is similar. "The trend is your friend". Or enemy, depending on your point of view.

That means that the average house is losing £190 per day, or £23.75 per working hour. Therefore... Not owning a house in Aberdeen is like having a very well paid 2nd job. Brilliant!

OIL PRICE FORECAST GLOOM FOR ABERDEEN INDUSTRY. Merril Lynch cuts 2009 oil price forecast. '...a "synchronous global recession" could bring oil prices to $50 a barrel. It said U.S. oil demand is far outpacing its decline expectations, European demand is falling rapidly, and some of the emerging markets aren't keeping up either. Plus, a string of fields in Saudi Arabia, Qatar and others will bring about 3 million barrels of oil a day in incremental capacity over the next 12 months.' I'm sure you can all draw your own conclusions about what this means for house prices in Aberdeen.