House price stability in NI is preferable to surging valuations

News Letter editorial
News Letter editorial

Perhaps no other economic factor in Northern Ireland has caused more hardship and heartbreak over the last decade than house prices.

In 2006, it seemed that the costs of homes would only ever rise. There had never been a significant downturn in property prices.

This led the Province into bubble territory, as it did the Republic. On both sides of the border, purchasers saw prices rising steeply and looked back on the record of relentless growth and so concluded that they needed to buy now before prices rose even further.

Tragically, some first time buyers entered the market at this point and borrowed so heavily that they ended up either financially ruined, if they lost their home, or at best deeply in negative equity, from which they have not yet emerged.

It is impossible after the sort of collapse that happened in 2008 and 2009 to find a market price level that will satisfy everyone. The people who are most in debt want prices to recover to at least the level they bought at. The people who are not yet on the ladder want prices to remain low.

Given these sharply diverging objectives, prices in Northern Ireland are probably now the nearest they can be to a level at which the greatest number of people is satisfied.

The RICS and Ulster Bank Residential Market Survey for Northern Ireland for July found that sentiment improved during that month, after a downturn in the immediate aftermath of Brexit. There is caution but an expectation that prices will move up.

The deflationary mindset that impacted badly on sales is gone, and this is good. As a society we need enough confidence for developers to build homes that will at least recover construction costs. We also want homeowners to have enough confidence in the value of their house that they are willing to spend money.

But few people would gain if prices shot up as they did a decade ago. The current stability is far preferable to that.