With the potential of Tata’s Port Talbot steel works to close its doors, the economic impact to the Port Talbot property market could be a 10% drop in the average house price over the next 12 months.
Port Talbot town is home to over 37,000 people, 11% (4,104) of which work at Port Talbot’s Tata steelworks – the largest of its kind in the UK.
It has been estimated that £2.5bn of investment is needed to turn Port Talbot’s steelworks into a profitable producer of high-grade steel and there is still hope a buyer will be found in time to save the site.
However, as the primary source of employment and a driving factor behind Port Talbot’s economy, the closure of the plant could have grave implications on the Port Talbot property market and the local economy as a whole.
It’s clear that the future security of the plant has a knock on effect to the Port Talbot property market and since Tata completed a deal to acquire the plant from Corus in 2007, the average house price in the area has increased by more than £10,000. However, at £103,000, it’s already considerably lower than the UK average and it would seem the future uncertainty of Port Talbot’s future in the steel industry is already having an impact. Prices in the last three months alone have already dropped by as much as £4,000 and, if a deal isn’t reached, this downward spiral could continue.
The decision to close this plant could effect far more than property prices in Port Talbot, however, the first signs of economic decline are often an increase in unemployment rates and the resulting drop in property values.
When the local economy of an area relies so heavily on one specific industry to survive, the consequences of said industry disappearing all together can be catastrophic to the community.
We’ve seen a similar decline over the last 18 months or so in Aberdeen, where the slump in oil prices has had a huge impact on the economy and property market in particular. Property demand in Aberdeen over this time frame has been almost non-existent and as a result, the average house price has dropped by £11,000. However, the up and down nature of the oil market means Aberdeen has seen a slight uplift in demand during the start of 2016 and so things could be turning around.
Unfortunately, there will be no such hope for those in Port Talbot should the steelworks shut and, although the area does have other economic outputs, the loss of Port Talbot’s economic cornerstone will be extremely hard, potentially impossible to overcome.”