Insight Series: Northern Ireland Market Report 2017

NORTHERN IRELAND S PROPERTY MARKET

In line with the upswing in Northern Ireland s economy, property values have been increasing faster than at any time since the crash, with house prices across the country rising by 3.8% in the month to August 2016 alone (ONS). This recent surge builds on strong longer term performance: market activity has been buoyant, with more than £500m worth of deals transacted in each of the past two years, and steady price growth of 8% during 2015 (Savills).

Appreciation is largely driven by a lack of new dwellings, with supply levels well below estimated requirements. The Northern Ireland Housing Executive forecasts that some 190,000 new homes will be needed between 2008 and 2025. That equates to 11,200 new dwellings per year, but less than half that many were completed in 2015 (Savills).

Alerted by record building activity in the commercial and hospitality sectors, Deloitte included Belfast in its annual crane survey for the first time in 2017. It found that the city is building more new hotel rooms than record levels seen in Manchester and Leeds, an entire new district of student accommodation, and plenty of office space. Yet at the same time, there were only 56 residential units under construction across the entire city at the start of 2017.

Such an extreme lack of supply in the context of the 11,200 new homes the country needs is good news for homeowners and investors, though Belfast will need to loosen planning constraints if it is to accommodate future demand.

Another important reason to expect significant price growth in the coming years is the incredible fact that prices still sit around 46% below their peak. Because that peak looked somewhat precarious even in the heady days of 2006/07, the market is unlikely to make up that entire shortfall for a number of years. But it leaves plenty of room for growth, and the market is already catching up.

Based on a continued lack of supply, and favourable business environment, Savills has projected price growth of around 6% per annum over the coming three years.

The Northern Ireland Housing Executive has pointed out that sustainable growth over the past several years has set the market up well to avoid potential negative consequences from Brexit-related shifts. Indeed, according to the latest Royal Institution of Chartered Surveyors (RICS) and Ulster Bank market survey, the number of people looking for a new home in September 2016 rose significantly for the first time in six months. At the same time, new instructions to sell rose less sharply, further skewing the balance between supply and demand that has been a consistent driver of price growth.

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