THERE’S a far-flung corner of Scotland where workers earn 10 per cent more than the national average, where unemployment rarely exceeds 2 per cent (against the Scottish average of 5.6 per cent), and where house prices grew last year by 16 per cent, the highest in Scotland. Welcome to Aberdeen, Granite City and oil capital of Europe.

The property market in Aberdeen is firing on all cylinders, fuelled by the strong local economy, the oil industry and a shortage of houses. “The going rate for property in Aberdeen is currently £300 per square foot, which is the highest in Scotland,” says Stuart Black, of Knight Frank in Scotland. The average property price in the town is £175,523, closer to the UK average, at £192,314, than the Scottish, at £138,655, according to the Bank of Scotland. “That is unusual for Scotland,” says Ian Considine, of Aberdein, Considine & Co, the biggest estate agency in the northeast region, “and it reflects the affluence of the town.” He points out, however, that you can still buy a two-bedroom flat in the city for £80,000.

Aberdeen has a large, semi-transient population of oil workers and students at the city’s two universities. According to Knight Frank, the student population grew by 27 per cent to 27,000 between 2000 and 2005. That fuels the rental, and therefore the buy-to-let, sector. Ian Considine recently acted for a property speculator from southern England who claimed the city’s rental returns were the best in the UK. Stuart Black puts them at £700 to £800 a month for a two-bedroom flat, against £550 to £650 in Glasgow and Edinburgh.

Aberdeen is best known for its grey granite buildings, but tenement flats in traditional townhouses are hard to come by. “Granite has always been a good bet, because it will be here for a lot longer than we will,” says Considine, “so old flats are very popular. It’s common to have 20 people bidding for the one property.” Stuart Black agrees that there is a shortage of housing stock for first-time buyers, even though graduates working in the oil industry are earning around £30,000, about £10,000 higher than starter salaries in Glasgow and Edinburgh.

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There is money to be made, therefore, in building more homes, and Barratt Homes flags flutter at every corner. An added attraction of new-build is that buyers are guaranteed a fixed price and can therefore avoid the risky Scottish blind bidding system.

Next to Aberdeen FC’s Pittodrie stadium, 20 minutes from the city centre, is The Park, a popular development by Lorimer Homes. The 149 one, two and three-bedroom flats sold out a year ago and investors are cashing in on the rising market. One two-bedroom flat bought for £130,000 in February 2006 has just sold for £191,000. Lorimer is currently waiting for planning permission to build 32 new units, for which there is already a waiting list of 300.

The Park is unremarkable, except for the three-bedroom flats with large curved windows, which have been popular with Aberdeen footballers, but any competitively priced flats aimed at the rental market will succeed in present conditions. A more interesting development is Eastbank, built by Knightsbridge Homes in a smart area of town off Queens Road. A gated development in a pretty location, with traditional granite stonework and a slate roof, Eastbank is firmly aimed at downsizers. “People with big family homes can now retire early on the profit of their house,” says Grace Brownlow, of Knightsbridge. “They can live abroad half the year and keep a central bolthole.” The 23 two-bedroom flats are priced from £350,000 and are on sale in May.

Aberdeen is still a canny investment. Knight Frank estimates that the city’s economic output will rise by 2.1 per cent this year. The international airport should receive £60 million of investment in the next ten years, and BP and Shell are investing in new headquarters in the city. And don’t let the thought of all those oil-rig workers and students put you off. According to Lisa McLeod, of Knight Frank’s Aberdeen office: “People used to just go out drinking on a Saturday night, now they go to restaurants. It’s much more civilised these days.”

Knight Frank, 01224 626890 Aberdein, Considine & Co, 01224 589589

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