Northern Ireland Residential Property Price Index Comment

Northern Ireland’s housing market has been a source of continued positivity in recent years, with housebuilding, prices, transactions and mortgage activity all at multi-year highs.  Though the property market remains in recovery mode, rather than recovered, following the biggest residential property downturn in UK history.

Residential property price growth has been slowing in both the UK and Republic of Ireland markets. The latest Residential Property Price Index for Northern Ireland points to a similar trend. Residential property prices posted their first quarterly fall in two years in Q1 2019 with a 1.0% decline.  Annual house price growth eased from 5.1% in Q4 2018 to a more sustainable 3.5% in Q1 2019 – a rate that remains above consumer price inflation and broadly in line with average earnings growth. Lower rates of house price inflation (2-3% p.a.) are to be welcomed.

Northern Ireland’s current rate of residential property price inflation compares with 1.4% y/y for the UK and 4.5% y/y for the Republic of Ireland. The UK’s growth rate was the slowest in 6-years while the Republic of Ireland’s marked a 5½-year low.

Despite the latest quarterly dip in local residential property prices some areas have fared better than others. The Causeway Coast is in the grip of golf fever ahead of July’s British Open golf tournament at Royal Portrush. The Causeway Coast and Glens was one of a few local government districts to post quarterly price growth in Q1 with prices almost hitting double-digits on a year-on-year basis (+9.6%). The Causeway Coast and the Glens has witnessed the largest cumulative price rises over the last five years at 45%. Next is Derry City & Strabane (+40%), followed by Fermanagh and Omagh (+37%) and Belfast (+33%). Mid and East Antrim has witnessed the weakest rates of price inflation over the same period.

Interestingly the detached property market (traditionally the most expensive properties), is the slowest growing segment of the local property market. The annual rate of price inflation in this segment eased to 1.5% – its smallest annual rise in 5½ years.  Similarly new builds (for all property types) are faring better than the second-hand market. The new build market saw an acceleration in property price inflation from 1.4% in Q4 2018 to 3% in Q1 2019. Conversely, existing dwellings saw price growth ease from a robust 6.3% to 3.6% .

House prices always attract a lot of media attention, however it is activity (sales & housebuilding) that is more significant from an economy’s perspective. There are signs that the housing market is cooling on this front too. Following seven years of consecutive growth, the number of residential sales appear to have stalled in 2018. Furthermore, the provisional Q1 2019 figure suggests a decline in sales activity. While the headline data points to a sizeable 22% y/y decline this headline is misleading due to late sales returns. Comparing the latest figures with the corresponding ‘provisional’ figures last year reveals a fall of just 6% y/y. Meanwhile it is a similar story on the housebuilding front. While the number of completed housing units increased by 10% y/y in Q1 2019 to 1,869 dwellings (the highest Q1 figure in a decade), housing starts fell by the same margin.