House prices amongst the fastest growing in the UK

Posted: by August 14th, 2019

PropertyPal’s Chief Economist, Jordan Buchanan gives his insight into the latest Northern Ireland House Price Index for Q2 2019 and what they mean for current and future local home owners.

The latest House Price Index for the second quarter of 2019 highlights house prices in N.Ireland increased by 0.8% in the last three months and by 3.5% compared to last year. This is equivalent to a typical home costing £4,700 than it did this time last year.

N.Ireland experienced the second fastest recorded rate of growth across all 12 UK regions, second only to Wales. The wider UK housing market showed more modest price growth of 1.1%, largely driven by falling prices in the London area.

Figure 1: UK Regions annual house price growth

Since the Brexit referendum there has been no clear evidence of a slowdown with local prices over 11% higher than mid-2016 levels and by 8.2% across the UK. London is the only region where prices are lower than 2016 levels. 

To date the standardised home price in N.Ireland is approximately £137,000 following 5 consecutive years of house price growth as the property market continues its recovery from the credit crisis in 2007-08. 

Encouragingly property prices increased across all home types last year:

  • Semi-detached homes increased by 4.6% to £133,500, an increase in value of £5,900 compared to Q2 2018.
  • Detached homes increased by 4.1% to £204,000, an increase in value of £8,000 compared to Q2 2018;
  • Terrace homes increased by 2.5% to £95,200, an increase in value of £2,300 compared to Q2 2018; and
  • Apartments increased by 0.4% to £108,400, an increase in value of £400 compared to Q2 2018.

Figure 2: N.Ireland quarterly house price growth by property type

Despite the latest appreciation, house prices are approximately 39% below peak levels in 2007 and over 41% lower than the UK wide average (although a more sensible comparison is 34% lower than Great Britain excluding London). 

As it stands, house prices are amongst the most competitive across all UK regions which should support First Time Buyers (FTB’s) to join the market. This should not be overlooked and is a significant selling factor to attract and retain our most talented people.

In the early 2000’s the FTB segment of the market accounted for 2 in every 3 home loans. By 2007 this fell to 1 in every 3 as many were priced out of the market as wage growth didn’t keep pace with soaring property prices. In recent years the FTB has returned as the driver of activity, once again accounting for 2 in every 3 loans.

Across N.Ireland the median age of a FTB is 31, with a household income of £33,000 and purchasing houses around £133,000 with a 15%-20% deposit. 

Figure 3: Number of loans for First Time Buyer & home-movers

Beneath the headline figure for N.Ireland, there is considerable variation in prices at the council level. House prices are most expensive in Lisburn and Castlereagh at £163,500 and the most affordable in Armagh, Banbridge and Craigavon, costing closer to £120,000. 

Figure 4: N.Ireland council area house prices and sales volumes

Over the last year, all council areas have experienced rising house prices with growth ranging from 1.4% in Fermanagh & Omagh to a sizeable 9.0% in Newry, Mourne & Down. This level of growth is chart topping not only in N.Ireland but across all of the UK, and by a significant margin. 

Belfast’s 3.3% growth is mid ranked in a N.Ireland context but amongst the fastest of all cities across the UK. For comparison, house prices in the other capital cities, Edinburgh and Cardiff grew by 3.0% and 1.6% respectively. Prices in the wider London region fell by 2.5% but by almost 10% in the more disaggregated City of London area, reflecting the scale of the market adjustment in Southern England. 

Figure 5: UK cities house price growth

The number of home sales is a particularly useful barometer of wider economic confidence. Put simply, when consumers are confident and the economy is doing well there tends to be more home sales.  

Despite the heightened uncertainty in the current economic climate, this doesn’t appear to be obviously feeding into slowing transactions. In the second quarter of 2019, there were over 5,200 homes sold (although this will be revised up in the coming months as additional sales after the publication date are counted). 

For context, there has been an average of 5,500 homes sold in the second quarter of each year since 2014. 

All things considered; this was an encouraging performance for the local property market. House prices are continuing their recovery at sustainable rates and closer aligned to wage growth, alongside transaction numbers which aren’t sending any warning signals of consumers holding off on their home purchase. Furthermore, the latest labour market data from earlier this week showed an all-time high employment rate in N.Ireland and continued low rates of unemployment. 

Whilst the fundamental economic drivers of house price growth remain strong, sentiment cannot be overlooked. The next few months will be extremely important in determining the economic outlook and house price impact for second half of 2019. 

There is evidence of a slowing global economy (notably in Europe), rising trade tensions and the latest UK GDP numbers showed the economy contracted for the first time since 2012. Brexit and notably a ‘No-Deal’ Brexit remains the most challenging obstacle for N.Ireland. 

Assuming a No Deal Brexit is avoided it’s likely to see a positive market response with continued growth in house prices. Alternatively, a No Deal Brexit could push an already fragile UK economy into a recession, which would have negative knock on effects on the property market.  We will continue to monitor the negotiations and respond with the potential economic implications for N.Ireland. 

Jordan Buchanan, Chief Economist

Email: [email protected] Twitter: @jbuchanan0707

Coming soon…

This Autumn, PropertyPal will be releasing its first contribution in a new Residential Property Review series. 

PropertyPal’s Residential Review series will offer data driven economic analysis on the residential property market in N.Ireland. At PropertyPal we recognise that buying, selling, moving or renting a home is one of the biggest decisions of a lifetime. We aim to provide informative insights on current market trends as well as providing forecasts and outlooks on the future performance of the N.Ireland economy and the residential property market.  The report can help inform all stakeholders with an interest in the property market including; estate agents, developers, policy makers, the media and the general public.  At PropertyPal we aim to give our users the best experience and we hope this addition of market analysis will prove to be a useful gauge of developments in the property market. We look forward to sharing this research in the coming months. 

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