Like the labour market, Northern Ireland’s housing market has been one of the best performing parts of the local economy. One key difference, however, is the housing market hasn’t captured the record highs and lows that the labour market has enjoyed. Following the most significant property downturn in UK history, the scars are still apparent in the various aspects of the housing market. While many of the indicators point to significant growth over the past decade, the story is one of recovery has opposed to recovered.
Up – prices still rising albeit at a weaker rate
The latest batch of housing market statistics reveal that the recovery has succumbed to a slowdown. Property prices are the housing market statistic of choice for small talk at dinner parties. For the past seven years the chat has been of continued house price growth. However, the latest figures from NISRA reveal that the pace of growth eased to 2.5% y/y in Q4 2019. That’s less than halve the pace of growth recorded the previous year and marks the slowest rate of house price growth since Q4 2013. Nevertheless, the rise in local property prices still compares favourably with the UK (+1.6%) and the Republic of Ireland (+1.0%).
Belfast saw the weakest price rises of all the Local Government Districts in Q4 2019. Prices in the capital were broadly flat over the year which marked the weakest rate of growth in 6½ years. Meanwhile the Causeway Coast and Glens (+4.5%), Fermanagh & Omagh (+4.4%) and Newry Mourne and Down (+4.3%) all saw annual price gains in excess of 4%.
Despite a strong rebound 44% since the residential property price low almost seven years ago, median prices in Northern Ireland are still 1% below where they were a decade ago and a whopping 38% below Q3 2007’s freak peak. By comparison, prices in the UK (+40%) and Republic of Ireland (+17%) are significantly higher than a decade ago. The Republic of Ireland has seen prices rise by 83% since its Q1 2013 low although they remain 17% below Q2 2007’s peak.
Flat – residential property transactions appear to have levelled off
From an economist’s perspective, activity is a more meaningful indicator of economic health than prices. Residential property transactions have risen for the last eight years to 2018. But this continuous growth appears to have come to an end in 2019. While the provisional 2019 figures will be revised up in due course they are expected to be broadly flat relative to 2018. A dip in transactions looks likely in 2020 given the fall in the rate of house building.
Down – the number of completed dwellings and housing starts has fallen
The most concerning aspect of the Q4 / 2019 statistics revealed today concerns housebuilding. Last year the number of completed dwellings (7,437) fell for the first time in 4 years. The decline was relatively modest (-3%) but the pace of decline accelerated in the final quarter (-10% y/y). 2020 is expected to see a further fall given that housing starts posted a 16% drop (>1,300 fewer starts) in 2019. That marks the steepest decline since 2012 and the lowest number of starts since 2015. Antrim and Newtownabbey (-31%), Causeway Coast and Glens (-30%) and Derry City & Strabane (-26%) reported the steepest declines in 2019. Armagh City, Banbridge & Craigavon was the only district to record a rise in housing starts last year.
Northern Ireland’s housing market begins the new decade with a notable loss of momentum. The number of property transactions may be more than double the levels seen a decade ago but housebuilding activity is lower than in 2009. This will act as a drag on economic growth going forward.