A graph charting instances of house prices being discussed at dinner parties across Belfast and Dublin would show a very large spike around 2007 followed by a deep trough in the years after the boom rediscovered gravity. Indeed, the subject became almost taboo as the downturn unfolded and residential property prices fell almost 60% from their respective peaks.
London on the other hand escaped the extreme roller-coaster price moves characteristic of the Emerald Isle. The UK’s capital saw prices fall by less than one-fifth (16%) peak-to-trough with prices returning to their pre-downturn levels within three-and-a-half years. Unlike during the 1990s, homeowners in London have not been afflicted by negative equity. Indeed, quite the opposite has occurred with equity coming out of home-owners ears.
The influx of foreign investors, boosted in recent years by sterling weakness, has helped push London residential property prices through the roof. Prior to the EU referendum, prices in London were rising at 11-14% p.a. This subsequently slowed to 2.5% y/y in Q4 2017. Nevertheless, London residential property prices are a whopping 94% off their Q2 2009 low and some 62% above the Q4 2007 peak. Those homeowners / investors who purchased property 12 years ago will have seen prices more than double. However, recent survey data suggests that the Bull Run in London property prices may have come to an end.
Lost Decade …and some
Returning to this side of the Irish Sea, residential property prices have been rising strongly in both Belfast and Dublin. The former has seen prices rise by 40% since the trough almost five years ago. Dublin’s price recovery has been better still with prices up 86% in five-and-a-half years. Despite these impressive gains it is important to maintain perspective. Unlike London however, Belfast & Dublin prices are still 43% and 24% below their record highs in 2007. Average prices in the Republic of Ireland capital are back at Q1 2005 levels with Belfast prices around early-2006 levels.
Relocation, Relocation, Relocation
The challenge for both the Republic of Ireland and Northern Ireland housing markets concerns transactions. A return to pre-downturn levels of residential transactions remains as far away as ever. With housebuilding at subdued levels in both jurisdictions, restricting supply will support prices. This appears to be more of a concern in Dublin than Belfast. Once again, the capital of the Celtic Tiger is posting double-digit year-on-year growth in house prices (11% in Q4 2017). This is good news for those buyers of yesteryear still struggling with negative equity. But it is not good news for those trying to gain a foothold on the property ladder. Affordability amongst first-time buyers is likely to climb the political agenda. Belfast’s residential property price growth is somewhat tamer at <3% p.a. For many former NI citizens working in London relocating to Belfast / Northern Ireland and checking out of London property prices could be the trade of the decade.