Today’s batch of housing market figures for the third quarter could be summed up as “two up two down”. Two indicators (residential property prices and house completions) posted year-on-year growth. Meanwhile housing starts and the number of residential property transactions are on the wane.
Generation rent. House prices are always one of the most closely watched economic indicators by the general public or at least homeowners and potential first-time buyers. Although the rise of the private rented sector over the last decade means for an increasing share of society, rental prices are more relevant than house prices. Homeownership is not on the radar for as many under 40s as it once was.
One direction.Northern Ireland’s house price recovery is six-years old. For twenty-three of the last twenty-five quarters residential property prices have gone one way – up! Despite this significant run of steady price rises, less than one-third of the 57% drop in prices that occurred between Q3 2007 and Q1 2013 has been recouped so far. As of Q2 2019, local house prices were still 39% below Q3 2007’s ‘freak peak’.
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.
The UK economy almost came to a halt in Q4 last year as mounting Brexit concerns took its toll on business investment. However, consumer spending maintains its gradual recovery, driven by higher real incomes.
The latest NIJobs.com Jobs Report with Ulster Bank indicates a robust local jobs market at the end of 2018, despite ongoing uncertainty around Brexit and the lack of a functioning local Executive and Assembly.
There’s no shortage of information on the housing market, telling us how prices and sales activity for instance are changing on an annual, quarterly or even monthly basis. These surveys are important and give us a flavour of how the market, which is a key part of the economy, is performing. But there is a danger that we get too fixated on these numbers and miss a more important trend.
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.
What a difference a year makes. In the football world, Leicester were languishing at the bottom of the English Premiership 12 months ago, now they look on the cusp of winning it. They have at least guaranteed a spot in Europe next year. Continue reading →