Property market in the North will take 12 years to revover, economists claim
House prices in Northern Ireland could take another 12 years to recover to the values posted before the credit crunch, economists have claimed.
Average property prices are 53% below the 2007 market peak, falling almost 6% in the last year, research by PwC found.
The consultants outlined the findings in their latest Northern Ireland Economic Outlook (NIEO) survey on the day another property survey suggested the market was in the early stages of recovery.
The University of Ulster Quarterly House Price Index found the overall average price of a house in the second quarter of this year was £130,864 (€152,267) – virtually unchanged from £131,128 (€152,574) the previous quarter.
PwC Northern Ireland chief economist Dr Esmond Birnie said even if the decline bottomed out by the end of next year, the region would live with the legacy of falling house prices for a long time.
“An overspill from the Republic’s credit and property bubble, rampant speculative investment, and remarkably loose lending policies, drove Northern Ireland average property prices up by 250% in the decade to September 2007,” he said.
“That was around twice the UK average increase of 145% and a huge correction has driven prices back to pre-boom levels.
“And while some types of property in popular areas of Northern Ireland are demonstrating real recovery, average property prices have some way to go before they are clearly on the turn.
“That means real recovery in the property market will be long, difficult and wholly dependent on factors ranging from reduced household debt to more liberal lending policies.”
PwC said any significant recovery in the housing market needed a combination of increased consumer confidence, reduced household debt and a willingness on the part of banks and mortgage providers to lend on more favourable terms.
In the university study, the strongest performing property type was detached bungalows, with values increasing by 16.2% over the last 12 months to an average of £148,342 (€172,603), while terraced and townhouses increased by 6.5% to £86,216 (€100,316).
In contrast, semi-detached bungalows fell 25.3% over the year to an average of £103,394 (€120,304), detached houses declined by 13.9% to £199,553 (€232,190), semi-detached houses saw a drop of 10.6% to £120,377 (€140,064) and the apartment sector fell 9.9% to £97,765 (€113,754).
In regard to regional performance, Lisburn was the highest priced area in Northern Ireland while north Belfast was the least expensive.
The authors of the report, Professor Alastair Adair, Dr John McCord, Professor Stanley McGreal and Dr David McIlhatton, said in a joint statement: “The sustained improvement in the volume of transactions in the survey indicates momentum in the market and although the overall average price is virtually unchanged over the quarter, the stabilisation of price levels has – according to estate agents – led to an increase in first-time buyer activity.”
The house price index was produced in partnership with Bank of Ireland and the Northern Ireland Housing Executive.
Bank of Ireland economist Alan Bridle said: “Six years on from the peak of the price boom, there is encouragement in this survey with the pick-up in sales and average prices largely unchanged. The more positive trends from the mortgage and labour markets of late should be supportive of steady if unspectacular progress for the rest of 2013 and into 2014, notwithstanding continued variable performance in local markets.”
The Housing Executive’s head of research, Joe Frey, said: “It is not surprising that given the ongoing challenges in the labour market the housing market remains rather flat.”
