Many people believe the British are a cynical bunch, and if you look at it from the phrases we use, this could be proved to be the case. Phrases like ‘no good deed goes unpunished’ may show we are a bunch of negative nellies, while ‘wine before beer, feel queer’ is fine but you’re going to feel pretty ropey anyway if you follow the beer with a mixture of tequila, vodka and kebab.
However, what about ‘what goes up must come down’? I’m sure the bungee jumpers and skydivers among you will agree, but what about the Northern Irish property market? The last few years have seen monumental growth in house prices across the province, with the average property price now pushing towards the £200,000 mark.
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So can the folk of Antrim and Enniskillen continue to fly in the face of economic cynicism and maintain annual growth which, according to the University of Ulster’s Quarterly House Price Index, reached 37 per cent in 2006?
Pushing prices skyward
Rodney McKirgan, regional sales manager for the North at BM Solutions, believes a number of factors have been at work to push prices skyward.
“A lot of people have jumped onto the second property bandwagon as a retirement plan. There has also been an influx of migrant workers, mostly from Europe but from all over the world as well. They have come over and they have no place to live, so smart people have bought properties to house them. It’s also foolish not to buy property when prices are shooting up at the current rate.”
But much of the exaggerated price growth can also be seen within the context of a market correction, as prices in the province caught up with the UK mainland once political tensions eased. The average price at the end of 2006 in Northern Ireland was £195,751, according to the University of Ulster, putting prices above the average in Scotland, Wales and large swaths of the north of England.
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However, while those already on the property ladder have benefited from the increase in house price inflation, the many looking to buy their first home have increasingly struggled to get the necessary finance. Affordability is as bad in Northern Ireland as anywhere else in the UK, but lower wages compounds the situation further.
This has led to a situation where buy-to-let has boomed as parents have looked to help their children get onto the property ladder. As Paul Marland, AGM intermediary sales at West Brom for Intermediaries, explains:
“Northern Irish owners have significant equity in their houses so they are now using that to put into second homes. There are two factors which go for them. They can take out deposits without having to have a high loan-to-value mortgage but they also have a low residential mortgage so they can put more towards buy-to-let. The capital appreciation is still massive but they are buying properties to rent out but with the aim of offering it to their kids later.”
But as in the UK, BTL has helped to sustain demand for property and the upward trend of house price inflation. While the sector is expected to thrive as demand from those unable to buy fuels the rental market, McKirgan sees a new trend emerging.
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“Historically, we are good savers in Northern Ireland and we are now putting that money into property. Things have moved on though and you will struggle to buy under the £200,000 mark. But there is still feverish demand from landlords so smart investors are now looking to northern England and Scotland where prices are much lower.”
Unsustainable growth
So what else does the future hold for the Northern Irish market? Obviously the cynics may be right on this occasion, as most within the market agree the pace of growth cannot be sustained. One of the authors of the University of Ulster’s Index, Louise Brown, says:
“Clearly rates of increase of such magnitude cannot be sustainable over a long period and they raise the question as to whether and when there will be a market correction.”
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However, there are still plenty of indicators to show there is life left in the market. Forecasts put house price inflation at 15 per cent in 2007, and Gerry Bell, head of mortgage marketing at GE Money Home Lending, believes:
“I’m not sure this is the end of the road for the property boom. The dynamic for the market is the whole of Ireland and as both have good stable economies, it’s not uncommon for people from the South buying into the North and vice-versa. Also, if you look at house price inflation in the last five to 10 years, although it has gone up significantly, the annual rate is steadier than the rest of the UK, which has seen peaks and troughs in its growth rate.”
As Alan Bridle, head of research in Northern Ireland for Bank of Ireland, points out, 15 per cent house price inflation is nothing to be sniffed at. “We expect the growth to slow, perhaps higher in the early months but cooling off as the year unfolds. Even then, that growth would be comfortably above what our neighbours in the Republic of Ireland and Great Britain can expect.”
So even if house price inflation doesn’t reach the heights of 37 per cent again, there will still be plenty of capital appreciation for those with property in Northern Island. Whether you’re happy about this though, I’m sure, depends on whether your glass is half-empty or half-full.
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