We should beware house price rises in Northern Ireland based on weak foundations

It is 15 years since the bubble burst on the house price boom in Northern Ireland.

Previous research done for this newspaper, based on various house price indexes, suggested that prices in the province fell by an average of 58% to their peak in the spring of 2007 to their lowest point in around 2012.

The ballooning cost of homes in the run-up to the peak, particularly after 2004, followed by their collapse was a disastrous saga.

It brought the entire housing market to near paralysis, and left many businesses in financial ruin.

Sine the burst, Northern Ireland has had probably the best sort of recovery that you could hope for out of such a slump. Prices have risen gradually in a way that gives comfort to owners who have suffered the agony of negative equity.

The Ulster University Quarterly House Price Index now has an overall average house price of £198,890 in NI after an annual level of growth of 8.3% between the end of 2020 and end of 2021.

The rise in prices has also helped return society to a level of house prices that mean that homeowners feel that they have a valuable financial asset, in terms of their main property, and so to feel more confident about spending.

We need such confidence after the lockdown years.

However, it is a bad thing if such home price rises are based on weak foundations, such as on ultra low interest rates (which is a precarious basis for property rises, given that rates are slowly increasing) or on an irrational sense of financial optimism after the anxiety of the Covid pandemic.

It is also a bad thing if prices start to become unaffordable to first time buyers, and shut young people out of ownership.

We should not lose sight of the fact that for decades NI was seen to have very inexpensive private housing. This was seen as a good thing because it enabled citizens to live in their own homes in a region which can offer people a high quality of life, compared to more densely populated parts of the UK.

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