House price fall ‘masks the true picture of the market’

New house building is encouraging but the supply is still a long way from meeting demand said Mr Ramsey
New house building is encouraging but the supply is still a long way from meeting demand said Mr Ramsey

First time buyers are finding it harder to get on the housing ladder, an economist has claimed, despite the latest figures showing a fall in prices.

The figures from the NI statistics agency NISRA, show a 1% quarterly fall in the second quarter (Q2), the sharpest fall since Q1 2013.

The majority of the drop was down to a 4% fall in the price of detached homes against the previous quarter, though that figure is provisional and subject to revision the agency said.

However, Richard Ramsey, chief economist for Northern Ireland with Ulster Banks said the picture was not good for the traditional view of home ownership in the province.

“The standardised price of an apartment or house in Northern Ireland rose by 4.4% y/y in Q2 2018, slightly above the corresponding rise for the UK (+3.5%),” he said.

“House prices for first-time buyers are becoming less, not more, affordable.”

That, he said, may be welcomed by existing homeowners, particularly those who found themselves in negative equity.

“Northern Ireland’s residential property prices have rebounded by 36% since their low five-and-a-half years ago.

“This equates to a gain of £35.5k on the standardised house price.

“Despite this rise, local residential property prices are still a whopping 41% below their Q3 2007 ‘freak peak’.

“That means just over a quarter of the peak-to-trough decline in property prices has been reversed in almost 11 years.”

Significantly, house price inflation continues to outpace annual earnings growth and consumer price inflation, he stressed.

“This fact coupled with strong private sector rental inflation makes it more difficult for those not on the property ladder to gain their first foothold of home ownership.”

On a positive note, Mr Ramsey said the most encouraging signs in the housing market concern transactions and the scale of house building.

“These are more meaningful from a Northern Ireland-economy perspective than simply looking at movements in prices.

However he sai d the rental market remained more relevant in the Northern Ireland context.

Remember most individuals in their 20s and 30s don’t own their own home,” he said.

“News of house price rises will be irrelevant to many who won’t be able to become home-owners and bad news for those seeking to.”