The price correction in Northern Ireland’s housing market is now one year old although few will find cause for celebration.
The overall reduction may be more modest than expected and an “average” price does disguise volatility in local markets but a sense of perspective is still important – the average price is still c£64,000 higher than the summer of 2006.
A recurring theme in recent surveys is the high degree of variability across the region in terms of location, price bands and property-types and this should encourage a degree of caution from reaching sweeping judgements.
As this report indicates, there is no substance to the view that prices have “collapsed” across the board in Northern Ireland but there is clear evidence of particular “cold spots” where prices have fallen by at least 20% in the last 12 months, notably on the North Coast, Fermanagh and South Tyrone and Craigavon/Armagh.
Price resilience has been more common in Belfast, supported by relative buoyancy in high profile apartment schemes and higher value detached properties.
It is impossible to escape the pervading sense of negativity about the market although in my view this now relates less to price adjustments and more to the lack of transactions, the so-called “mortgage famine” and the absence of precedent in terms of a genuine housing cycle in this region.
Outlook
Reports of an estimated 25 to 30,000 properties on the market at present would strongly suggest we have not yet reached the bottom of the market.
Overall, the risks to average prices are still to the downside with a high probability of moving closer to the £200,000 level before the end of the year and a period of adjustment stretching into 2009.
With an expectation that prices have further to fall, some potential first time buyers perceive an incentive to postpone a purchase while for others there will be the desire but not the financial means.
No quick fixes
Beleaguered housing markets are now exercising policymakers from Washington to London to Madrid to Dublin.
The policy tools available to government seem limited – accelerating social housing provision, additional funding for shared ownership schemes, the suspension of stamp duty for first time buyers, extensions to the special liquidity scheme in an effort to boost mortgage supply all come at a price and with no certainty of immediate impact.
For the many looking for signs of stabilisation and “green shoots”, keep an eye on the transaction levels rather than prices – these are likely to turn first but it might be a while.
Alan Bridle
Head of Economics & Research
Bank of Ireland Northern Ireland
