The latest NI Residential Property Price Index (RPPI) reported its first quarterly decline in prices in 8 quarters. Residential property prices fell by 1% q/q in Q1 with prices some 6% higher than the corresponding period last year.
NI’s residential property prices recorded a peak-to-trough decline of 57% between Q3 2007 and Q1 2013. Prices have subsequently risen by over 12% (Belfast +19%). As a result, NI has recouped one-tenth of the peak-to-trough decline in prices with prices still 51% below their pre-downturn peak. From a wider economic perspective, the level of transactions is a more meaningful indicator of housing market performance.
Residential property transactions in Q1 2015 (4,058) recorded their first year-on-year decline (-9%) since Q2 2011. Despite this fall, the Q1 out-turn was still the second highest Q1 figure in the last 7 years.
On an annual basis, the number of transactions has been rising steadily for four years, with over 20,000 transactions completed over the last 12 months. This is more than twice the number recorded at the low in the year to Q2 2009, but 51% below the ‘freak peak’ recorded in 2006/07. A return to this ‘freak peak’ is neither expected nor desired. Instead a return to more ‘normal’ levels of activity that we would have seen around 2005 (29,000) would be desirable. This is 30% above where transactions currently are.
In summary, the recent housing market recovery appears to have stalled. Wage increases coupled with record low inflation are supporting affordability in the short-term. However, the pace of fiscal austerity is set to move up a gear after the July 8th Budget. The latter is likely to provide additional headwinds for the economy rather than tailwinds.
You can view and download a full note on the NI residential property market here.