From the headlines in the latest Northern Ireland housing market figures, you could be forgiven for thinking that ‘there’s not much to see here’.
Overall, prices were up marginally and, despite soaring interest rates, remain relatively resilient. But prices are probably the least interesting aspect of the market, and looking at other figures tells a different story. And if we consider some anecdotal evidence as well, it’s clear that there’s plenty to talk about in the market locally.
The first quarter of 2024 saw the fewest Northern Ireland property sales in nine years. Sales are down over 2% year-on-year and are almost 13% below Q1 2019 (pre-pandemic levels). 2023 also saw the fewest number of completed (i.e. recently built) houses in 64 years. This tells us that house prices have been supported by a lack of supply.
On the house building front, there has been some modest improvement, albeit from extremely low levels. The number of completed housing units rose by 3.3% year-on-year in the first quarter. There were some better signs on the housing starts front with starts up 16% year-on-year; although the number of starts is still below the corresponding quarter in 2019.
Anecdotally, we know that there are some interesting and noteworthy things happening as well.
Skips in the street are considered to be a sign of consumer and investor confidence. If you see lots of skips, it tends to be an indication that householders are spending money renovating or that buy-to-let investors are active. But in this economist’s experience, there aren’t a proliferation of skips around currently.
Anecdotally, I would say that I see much fewer this year than in previous years – albeit that most of my driving is done in Belfast. Given the cost-of-living crisis and with many facing the prospect of rolling off fixed rate mortgages, people don’t have the appetite and / or money to spruce up their bathroom or kitchen the way they would perhaps want.
The first-time buyers of six or seven years ago would typically now be investing in a new kitchen or bathroom, but some people in the industry say that they aren’t doing so. In addition to the economic circumstances, there is perhaps an element of this demographic (e.g. millennials) prioritising spending their money on other things, such as holidays and experiences, thus marking them out from previous generations.
Similarly to the situation with skips, for this time of year, which is considered to be peak house sales season, there seem to be relatively few for sale signs on show too. What this tells us is that many people are staying put in their current homes . . .but with the skip situation, they aren’t really investing in them.
Anecdotally, we have also increasingly heard about the phenomenon of ‘build to rent’ which never really happened in Northern Ireland in the past. So the fact that there are an increasing number of build to rent scheme locally is noteworthy and significant.
The area of build to rent that people will be most familiar with is student accommodation, where a developer builds blocks of accommodation to rent out to students from our local universities and colleges.
But increasingly, we also have examples of developers building apartments and housing to rent out to professionals, families and other households. These are developers who would in the past have built houses to sell. The reason this has been more commonplace is because of soaring rental values.
The stock of rental properties has slumped as buy-to-let landlords have exited the market as it has become less lucrative due to taxation and mortgages rates. But whilst long-term rents have fallen out of favour, short-term lets (e.g. Airbnbs) have become very popular, meaning that an increasing number of former long-term rental properties have been taken off the market.
The shift in demand towards rental properties is going to increase though. Before the pandemic (2019), less than half of 25–34-year-olds in Northern Ireland lived in rental accommodation whereas 60% did in 2023. This is the key ‘household formation’ category who would previously have been first time buyers. So the trend towards build to rent is only likely to grow. And this is quality housing.
We have seen Belfast’s student housing stock already transformed from the relatively low quality older accommodation to sustainable new builds in the city centre with gyms and other amenities. An exodus of students from the Holylands is therefore in train. Our private rented stock more broadly is likely to continue to see a similar transformation. The Lesley Parklands development near Tesco Knocknagoney is one example of quality build to rent homes geared towards young professionals, with gyms and rooftop terraces for residents.
We’ve also heard talk of more developments set to be built for over-55s – one recent example is the speculation around the Stormont Hotel site. With the aging population, this is a trend that will likely continue as well as developers see a major potential market.
The big macro factor that is likely to impact significantly on the housing market is the UK General Election. With housing such a major issue for the electorate, the next government will have to implement a range of policies to stimulate more housing development and to encourage the freeing up of houses for younger families.
The market has become clogged with people who would like to move up the chain unable to do so due to financial constraints. Equally, those higher up the property chain wanting to downsize don’t have the available options to do so.
- Richard Ramsey is chief economist at Ulster Bank
