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Recovery in NI Housing Market to be Slow and Highly Variable, Suggests Survey

31 August 2010

The Northern Ireland housing market is demonstrating erratic and uneven behaviour, according to the region’s most comprehensive survey of house prices.
The latest University of Ulster Quarterly House Price Index produced in partnership with Bank of Ireland and the Northern Ireland Housing Executive, covered the second quarter of 2010.  

The survey showed that over the previous year there had been an annual weighted rate of price growth of 2.4% but compared with the first quarter of the year the overall average house price actually showed a weighted decline of 2.5%. 

According to the authors of the report Professor Alastair Adair, Professor Stanley McGreal and Dr David McIlhatton:  “The findings of the current survey highlight the erratic and uneven behaviour of the current housing market.  

“On the positive side the small rate of annual price growth and the higher volume of transactions are welcomed signs. However, the weaker price performance during the spring quarter suggests that recovery of the housing market is fragile." 

The price statistics are based on a sample of 1,009 transactions in the second quarter of 2010 – appreciably larger than that for the first quarter of the year, which suggests a pick-up in transaction volume during a traditionally active quarter for the housing market. 

The survey put the overall average price of a house in Northern Ireland for the second quarter of 2010 at £163,459. The report uses a weighted index to even out fluctuations in the sample composition. While the simple average price increase is 2.9%, the weighted increase over the year in this survey is 2.4%. 

The economist Alan Bridle, Head of Economics and Research at Bank of Ireland Northern Ireland, said: “While recent evidence may indicate that average prices have returned to a more sustainable level, the impact on the housing market of impending spending cuts and budgetary restraints in Northern Ireland suggests the price risks are still to the downside. There is now a realism that a recovery to pre-crisis levels will only occur over an extended period of years. 

“The sluggish trends in the house-buying market continue to mirror developments in the Private Rental Sector, which has experienced a rapid expansion in supply and choice over recent years. The ready availability of property to let has resulted in large part, in a tenants’ market with considerable choice and bargaining power and I would not anticipate a material shift in sentiment as we move towards 2011."

The survey indicated that the market is becoming increasingly affordable, with 61% of properties selling at or below £150,000. 

The Housing Executive’s Head of Research, Joe Frey commented:“The latest analysis confirms our view that the housing market will remain flat for some time to come. An additional less obvious concern, however, is the impact of the new Government’s proposals for restricting Housing Benefit. These could have a very detrimental effect on both tenants’ ability to afford to live in the private rented sector and landlords’ ability to charge viable rents.” 

The new build sector represents a smaller proportion of sales this quarter at 26%, suggesting that the re-sale market has become more active. 

House Price Index
The long-term House Price Index, calculated relative to the base quarter for the survey in 1984, declined to 609.8. The graph of the index highlights the uneven recovery path of the market, a pattern which is likely to continue over the short to medium term. Despite these fluctuations, the longer-term house price index continues to significantly exceed the economy’s overall rate of inflation. 

Property Types
There are considerable differences in performance on a property type basis. Some exhibited increases in price, while others continue to see significant rates of decline. 

At one extreme, terraced/townhouses were down by 11.9% over the year to £105,580, semi-detached bungalows at an average price of £122,315 decreased in price by 8.2%, and apartments fell by 7.9% to £132,657. In contrast, detached houses at an average price of £295,445 rose by 18.8% and detached bungalows increased by 9.4% to an average of £196,666. The average price of semi-detached houses increased marginally over the year by 0.2%. 

Regional performance
Evidence of variable performance continued at a regional level, with market performance stronger in the Belfast area than elsewhere. 

In Belfast the average price of housing rose appreciably by 13% over the quarter to £185,281, continuing the strong price performance of the previous survey. 

Most sectors saw annual growth in prices with detached houses leading the market with an increase of 32.7% to an average price of £440,750. Terraced/townhouses rose by 0.9% to £123,589; apartments went up by 1.5% to £147,938; and semi-detached houses decreased in average price by 1.2% to £173,165. 

The highest priced city location was south Belfast (£272,917), followed by the east (£179,604), west (£149,394) and north (£129,699).  

North Down’s average house price of £209,732 again showed a significant improvement, with the overall average price up by 31% over the year. Major contributors to this growth were increases in the average prices of detached houses by 25.6% to £327,180 and detached bungalows by 23.2% to £246,615. Semi-detached houses and apartments also improved but the average prices for terraced/townhouses and semi-detached bungalows were down. 

The average house price in Lisburn rose significantly by 12.1% over the year to £195,836. With the exception of apartments, all sectors of the market have experienced price growth over the year, with terraced/townhouses up by 13.0%, detached houses up by 12.3%, detached bungalows up by 18.5% and semi-detached houses up by 1.4%. 

In East Antrim the overall average price was down by 2.9% over the year, making a distinct change compared to the annual increase of 7.6% in the previous survey. Average prices of detached houses at £219,000 and detached bungalows at £214,082 remain relatively buoyant, but prices across other sectors are lower. 

In Antrim/Ballymena the overall average price of £135,431 represents a significant annual decline of 19.5%, reversing the recovery noted over recent quarters. This has been due to poor performance in the quarter, with semi-detached houses down by 9.1% over the quarter to £121,477 and detached houses down by 27.4% to £269,800. 

For the Coleraine/Limavady/North Coast region the overall average price of £149,299 was down over a year by 18.3% continuing the trend in the previous survey. Major contributors to this decline were the very low average prices of terraced/townhouses at £77,750 and apartments at £103,788. 

For Derry/Strabane the overall average of £119,185 declined by 24.3% over a year, suggesting that the extent of price decline might be greater than anticipated. Average price levels across the market were consistently lower, though the detached bungalow sector increased in average sale price over the quarter.  

The overall average price for Mid-Ulster was £137,628 representing a decline of 18.5% over the year compared with the annual increase of 2.5% in the previous survey. All property types have seen average prices fall over the year with terraced/townhouses and semi-detached houses down by 3.9%; detached houses down by 14.3%; and detached bungalows down by 5.0%. 

In Enniskillen/Fermanagh/South Tyrone the overall average price fell by 19.6% over the year to £129,871, continuing the trend of the previous survey. The quarterly decrease of only 1.9% indicates some potential stabilisation of prices in the region. 

For Craigavon/Armagh the overall average price of £124,488 has increased by 4.5% over the year, suggested that improved market conditions have been sustained. Performance across property types was variable, with slight declines in semi-detached houses and terraced/townhouses, contrasting with a significant annual increase of 21.8% to £192,111 in the average price of detached houses. 

In Mid & South Down, the average price of £158,777 showed an annual decrease of 6.3%, contrasting with the 11.1% increase in the previous survey. All property types showed decreases in average sale price over the year, with detached houses, average price £244,278, performing best and only down by 1.3%.


Performance by Property Type Q2 2010

Market sector, Annual change, Average Price , Terraced/townhouse-11.9%£105,580Semi-detached house0.2%£147,873Detached house18.8%£295,445Semi-detached bungalow-8.2%£122,315Detached bungalow9.4%£196,666Apartment-7.9%£132,657 Average house price by region Q2 2010

Location Average Price Northern Ireland -All£163,459Belfast - All£185,281North Belfast£129,699South Belfast£272,917East Belfast£179,604West Belfast£149,394North Down£209,732Lisburn£195,836East Antrim£129,678L'derry/Strabane£119,185Antrim/Ballymena£135,431Coleraine/Limavady/N. Coast£149,299Enniskillen/Fermanagh/S.Tyrone£129,871Mid Ulster£137,628Mid & South Down£158,777Craigavon/Armagh£124,488