ONE of Scotland’s biggest housebuilders, Stewart Milne Group, has highlighted the recent downturn in the key Aberdeen area market after posting a two thirds increase in annual profits.

Owned by entrepreneur Stewart Milne, the group made £5m pre-tax profit in the year to 30 June, up from £3m in the preceding period as it capitalised on strong demand for homes in places like the Central Belt.

However, Mr Milne wrote in the accounts for the year: “Following the year end, we have experienced challenging trading conditions in the North East Scotland Market as a result of the significant fall in the oil price.”

He said the group is trying to rebalance its land bank with more sites in Central Scotland and North West England. This will make it less reliant on the market in the area in and around Aberdeen, where Mr Milne started the business in 1975.

The comments provide further evidence of how the downturn in the North Sea oil and gas industry is damaging the economy of North East Scotland.

Oil and gas firms have shed thousands of jobs since the oil price started tumbling in June 2014. The effects have rippled through the supply chain impacting on businesses in areas from engineering to catering and on demand for homes.

After out-performing many areas during the boom in the North Sea that ended in 2014, prices in Aberdeen have slipped into reverse.

Last week a survey found Aberdeen was the only major UK city which has seen a house price drop in the past year.

The Hometrack survey of 20 cities showed average house prices in the Granite City fell by 1.6 per cent to £190,900 in the year to February 2016. That compared to a 9.3 per cent rise in the previous year.

A study by the Scottish Parliament Information Centre found the number of home sales in North East Scotland has been falling year on year since the second quarter of 2014. Sales have been increasing in Scotland since the first quarter of 2015.

Stewart Milne Group noted improved market conditions in the UK construction market and in particular the Central Scotland and North West England housing markets.

The group plans to bring four new developments to market in Central Scotland this year, in towns such as Renfrew and Strathaven.

The group recorded a strong performance in the year to June, with turnover increasing 20 per cent to £253m, from £210m in the preceding year.

The highest paid director, assumed to be Mr Milne, enjoyed a 20 per cent increase in total remuneration, to £1.3m from £1.1m.

The division that makes timber frames benefited from increased demand across the UK.

Mr Milne concluded: “The Group has performed well and has positioned itself to take advantage of the improving market condition in the overall UK economy and explores opportunities in the Aberdeen housing market.”

He added: “We remain optimistic about the Aberdeen market despite some challenging conditions.”

Work on a new community Stewart Milne is building at Countesswells west of Aberdeen will begin this month. The first homes are expected to be available later this year.

The group noted it has secured a UK Government guarantee for an £86 million loan for the new settlement. Some 3,000 homes will be built over the next 15 years with three schools and leisure and healthcare facilities.

Last month Miller Homes hailed the strength of the market in central Scotland and said it plans to grow in the area. The firm noted strong demand for homes in the Glasgow and Edinburgh areas.