This survey analyses the performance of the Northern Ireland housing market during the fourth quarter of 2011 spanning the months of October, November and December. The report is concerned with trends and spatial patterns in the housing market drawing comparisons with the fourth quarter of 2010, as a measure of annual change, and with the third quarter of 2011 as an indicator of short-term, quarterly change. The report is produced by the University of Ulster in partnership with Bank of Ireland and the Northern Ireland Housing Executive.

Alan Bridle
Head of Research
Bank of Ireland
Northern Ireland

February 2012

The latest findings confirm that 2011 was another year of deflation for Northern Ireland’s residential market although the pace of annual house price decline is clearly moderating, from a regional perspective. A closer look at the 2011 data also indicates that after dropping in Q1, average prices in Northern Ireland were relatively stable during the rest of the year at just below the £140,000 level, although masking significant variations within the region.

Stability with average prices may offer some encouragement that we are approaching the “trough” of the cycle, particularly as the correction from 2007 peaks is already of the order of 45% and even greater in some locations. However, the most likely scenario is that while the re-pricing of the market is well advanced, it is not yet complete for the region as a whole or for all property types.

In the last 12 months for example, the overall price decline for terraced/townhouse and semi-detached properties was very modest, suggesting little scope for further downside. By contrast, the annual change for detached properties and apartments was much more significant, reflecting a slightly different demand/ supply dynamic.

In general, affordability measures improved slightly again during 2011 with the further softening of prices. It is revealing that during the last quarter, 35% of transactions were at or below the £100,000 level and nearly 70% at or below the £150,000 threshold.

It is also a commentary on the region’s rollercoaster ride with property that only 6% of properties now trade at or above what was the average price at peak of four and a half years ago.

Regional Variations

A strong feature of the survey is that sales volumes are more robust in some segments of the market than others and in some locations, notably the Greater Belfast area. By a considerable margin, the South of the city retains the distinction of having the most expensive property in Northern Ireland while in the North of the city, the average price of c £77k reflects the concentration of sales in the lower priced segments of this locality.

On the annual comparison with Q4 2010, the top performing subregions in the survey were Lisburn and East Antrim where average prices in both locations posted an increase in the 12 month period. This provided a counterweight in the index to the more substantial negative price movements (> 20%) recorded for areas west of the Bann where conditions remain very difficult.

2012 - More of the same?

The local market still faces into a number of headwinds that will limit a broad-based recovery in the near-term. One such headwind is the lingering hangover from the boom period of 2006/07 in terms of both a higher incidence of negative equity and more significant levels of arrears and possessions relative to other UK regions. Such legacy issues not only impact on confidence and sentiment but also constrain mobility within the market.

On more positive notes, the intervention of the ECB before Christmas in providing 3 year liquidity to the European banking system does appear to have stabilised markets and averted a second credit crunch. Domestically, official interest rates seem to be on hold until 2013 at least while Bank of England policymakers are contemplating an expansion of the QE programme to provide additional stimulus.

Inflationary pressures have started to recede sharply raising some hopes that real household incomes will stop falling soon and may even begin to rise a little again by year end. While bringing a measure of relief to household budgets, whether this is sufficient to rekindle house purchase demand remains to be seen.

Alan Bridle 
Head of Economics & Research 
Bank of Ireland Northern Ireland 
research@boini.com

The key finding of this survey for the fourth quarter of 2011 is the fragile state of the Northern Ireland housing market as evidenced by transaction numbers which remain low and price levels that are still declining rather than increasing.

The overall average price of residential property in Northern Ireland for the fourth quarter of 2011 is £137,219. In simple percentage terms this represents a decline of 8.4% over the year relative to the average price for the fourth quarter of 2010. The weighted rate of annual decline, the preferred measure for these surveys, is 10.7%. Quarterly price performance relative to the third quarter of 2011 illustrates the slight change in market sentiment at the end of the year with a simple rate of quarterly price decline of 1.8% or a weighted decline of 2.6%.

Performance by property sector remains highly variable over both the annual and quarterly time periods and reflecting the market as a whole average price levels are lower.

Annual performance provides a snapshot comparing the current average price on a property basis with corresponding statistics for the fourth quarter of 2010. On an annual comparison basis price levels are lower across the market, with the exception of semi-detached bungalows.

Annual % change and average price

At a regional level, the picture is similar to that for the overall Northern Ireland market. Average prices continue to be lower rather than higher with increasing variability due to the constrained evidence base.

The long-term house price index is calculated relative to the price levels for each property type at the base quarter for the survey in 1984. The overall index has declined this quarter to 502.47 reflecting the more difficult market conditions during the final quarter of 2011.

The pattern of the house price index since 2009 is one of uneven performance suggesting that recovery in the Northern Ireland housing market is likely to be highly variable and inconsistent. The index has shown a fluctuating picture throughout 2011, a picture likely to be replicated in 2012.