How long can this Indian Summer go on? - David Aleander

Cop 26 has note-0pulled up sticks and left Glasgow but the relative proximity of the two-week conference got me thinking about the weather and, in particular, the summer that’s just gone.

Activists protest against the Cambo oil field project on the sidelines of the COP26 climate change conference

It seems to come round every five years or so in Scotland – a summer that really lives up to the name; when, from the Western Isles to the eastern Borders, our country basks in extended periods of warm sunshine with only limited interruption from rain. And when July turns to August, and the nights begin to draw in, but still the warm, sunny weather continues, we ask ourselves, “How long can this go on?”

I have similar sentiments regarding the current trend in residential property values, the latest major survey of which has confirmed what can only be described as an ‘Indian summer‘ for the sector - rising house prices extending to well into October.

By that month, according to Halifax/BoS, average house prices in the UK were more than 8 per cent higher than in October 2020 with the figure for Scotland even greater at 8.6pc, although the average price north of the Border, at £190,023, is still somewhat below the UK equivalent all-time high of £270,027.

At the same time a different autumn survey – this time from Rightmove – shows a substantial increase in available properties sold subject to contract (or conclusion of missives as we say in Scotland) compared to last year.

So, how long can this go on?

In normal times, the autumnal sales ‘window’, which lasts roughly from late August to the end of October, would have closed by now but just as the trees – thanks to our extended summer – seem to be holding onto their leaves longer than usual this year, perhaps it may have a bit more time to go yet.

The pace at which things are moving suggests this Christmas might be a cracker for house sales but I feel less certain whether the trend will continue into the new year, when seasonal factors tend to put a brake on activity whatever the general level of consumer confidence.

In trying to predict an outcome, all I can do is quote that famous phrase by the former US President, Bill Clinton - “It’s the economy, stupid”.

If the economy grows to overtake pre-pandemic levels then so will house prices. If not then some recent buyers may find themselves owning properties valued at less than they paid for them (albeit in most cases, hopefully for a temporary period).

A microcosm is presented by the situation in Aberdeen, a city I used to live in and for which I still have a great fondness. Although values here are well down on what they were before the financial crash of 2008, prices in the city have shown a year-on-year increase of 7.5pc, according to the latest figures from Registers of Scotland.

This, surely, cannot be divorced from a revival, albeit limited, in commercial property uptake, itself connected to the fact that the price of oil has stayed above $60 per barrel of oil equivalent for the last six months. (In September, Shell announced that it would be moving from its current base at Tullos, on the outskirts of the city, to the new Silver Fin building on Union Street, taking 70,000 sq ft of floorspace to accommodate around 1,000 staff).

Although the still to be exploited Cambo field is located north-west of Shetland, and not in the North Sea, one must presume that should the UK government grant an extraction licence this will lead to a rise in confidence in the oil industry and, by implication, help the recovery of property prices in Aberdeen and the North-east.

But Cambo is controversial and its future will depend on whether we want to take a managed route to net-zero carbon (as generally desired by government and business interests) or go for it hell for leather (the choice of those activists who turned out to protest outside Cop26). And it’s still uncertain who will hold the greater sway.

David Alexander is managing director of DJ Alexander