Northern Ireland’s housing market – the prospects for recovery 

CaCHE Knowledge Exchange Broker, Prof Joe Frey, reflects on the recent webinar, Northern Ireland Economy and Property Market: Navigating Covid-19, organised by the Chartered Institute of Housing for Northern Ireland, which took place on 15 June.

On 15 June the Chartered Institute for Northern Ireland hosted an hour-long webinar on the Northern Ireland Economy and Property Market: Navigating Covid-19 – coincidentally the day Northern Ireland’s property market opened up for business again. Jordan Buchanan, PropertyPal’s Chief Economist gave a thoroughly researched and well-illustrated presentation which brought home some of the harsh reality of the challenges that lie ahead.

Jordan’s presentation began by providing some early indications about the short-term impact of the Covid-19 emergency on Northern Ireland’s economy and labour market. He reminded us that the broader challenges of the impact of climate change highlighted by the Davos summit in January 2020 hadn’t gone away but focussed on the more immediate economic danger resulting from the deep recession in the UK economy. UK GDP contracted by 20 per cent in April alone, with an estimated quarterly contraction of 19% and an annual one of 9% looking likely. The V-shaped recovery that in the early weeks of the pandemic looked possible is now looking increasingly implausible.

Official figures have not yet been published, but early indications suggest that Northern Ireland’s economy contracted by around 4% in Q1, 2020 and this combined with a sharper downturn in Q2, could result in an annual contraction of 8-12%. Recent ONS figures confirm the importance played by the furlough scheme (211,700 employees) and support for the self-employed (69,000) – meaning that almost one-third of the total workforce is receiving government support. Despite this “life raft in preventing mass unemployment in NI” the unemployment claimant count has doubled within the space of one month to approximately 65,000 (May 2020), with the hospitality, arts and recreation and construction sectors particularly badly affected.

The sharp downturn in the economy has had serious implications for Northern Ireland’s slowly recovering housing market. Perhaps the most immediate impact has been the downturn in housing market activity. In April, the number of house sales was approximately 80% lower than in April 2019 – a much bigger drop in transactions levels than in the other three UK jurisdictions. Echoing Peter Williams’ recent CaCHE blog on the mortgage market in the UK, Jordan highlighted the big reduction in the availability of high LTV loans: currently, no bank or building society is offering a 95% LTV deal on either new build or existing properties, indeed there are no mortgage deals available at 90 per cent for new build properties – a situation that reflects both concerns about the trajectory of house prices and capacity limits.

However, Jordan also drew attention to the challenges facing Northern Ireland’s housing market prior to the COVID emergency – in particular, the fact that in real terms both house prices and rents had risen by approximately 7 per cent since 2015, whereas real wages had fallen by 1 per cent, with the evitable increase in affordability pressures. Also, the ongoing challenge of negative equity in Northern Ireland, where UK Finance figures illustrate that at the end of 2018 around 6 per cent of all outstanding mortgages were in negative equity (compared to approximately 1 per cent for the UK as a whole). While this may have diminished a little in the period up to Q1, 2020 – it is likely to rise significantly again if prices fall anyway sharply in the coming months.

Jordan’s analysis of PropertyPal’s comprehensive listing of homes for sale also provided a number of useful up-to-date insights. Expectation of the re-opening of the housing market in Northern Ireland has unleashed pent up demand with a steep rise in the daily number of visitors to PropertyPal’s website during May and the first two weeks of June, while the number of properties coming onto the market has also accelerated.

Looking ahead, the overall performance of the UK and Northern Ireland economies and labour markets will remain critical. In Northern Ireland average house prices are still more than one third lower than in 2007 before the GFC. In this period of extreme uncertainty forecasts of economic growth and house prices must be heavily caveated and much will depend on the level of Government intervention. PropertyPal’s baseline estimates suggest that Northern Ireland’s economy will contract by around 9 per cent in 2020 and increase by 7% in 2021. In line with this, house prices are likely to contract by nearly 7% in 2020 before returning to the upward trajectory of around 5% that has characterised Northern Ireland’s housing market in recent years.

The comprehensiveness of the presentation left only a small amount of time for questions. Perhaps the most intriguing of these came from the virtually ubiquitous Professor Paddy Gray who, drawing on his recent research in South Belfast, highlighted the predicament faced by universities which, having invested considerable sums in purpose-built student accommodation, are now faced with the prospect of a big reduction in the number of international students as well as a bigger number of local students enjoying the comforts of living at home combined with more distanced learning. Perhaps a case for a re-purposing of one or two schemes to accommodate single people who are homeless?

Overall a highly informative and enjoyable event.

Prof Joe Frey is a Knowledge Exchange Broker for the UK Collaborative Centre for Housing Evidence


Date: June 24, 2020 2:29 pm


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