House prices seem to be on the road to recovery in the North.  The market stabilized somewhat in 2009 after falling 35% from the peak (Q3, 2007) and has risen by 4.9% in the first three months of the year.  The authors of the University of Ulster Quarterly House Price Index note, however, that price growth varies by area (with Belfast increasing and Mid-West and West declining) and house type (terraces and semi-detached continued to fall, detached and semi-detached bungalows increased), and the level of activity in the market is significantly below what it was in 2006 and 2007.  Belfast prices have risen by 18% over the past year.  Prices in the Republic for the same period continued to decline, falling another 4.8% to 34% of peak prices.  The average price of a house in the North rose to £169,497 (c.€200,000), bringing average prices for the North and South into approximate alignment (the average price for a house in the Republic in Q1 2010 was €204,830 according to the PTSB/ESRI index).

One of the major differences between the North and the South is that, due to a much tighter planning system, the North does not have a sizable overhang in the market, with supply and demand more aligned.  And there has been no need for a NAMA response by government, though a sizable proportion of NAMA assets (€4.8bn) are located in the North and agencies there are clearly worried about how these properties will be affect the market.  Whilst the market might be turning there, it seems likely that it’ll be some time before it turns in the Republic given supply/demand imbalance, the lack of access to credit, and the low levels of confidence in the housing market and the general state of the economy.  The way the southern market is heading, the performance of overseas assets is going to be important as to whether NAMA delivers.  The good news is that NAMA housing assets in the North are gaining value (or at least are not still falling).  The bad news is that the wider macroeconomic situation in the North is somewhat uncertain and widescale cut backs in public expenditure is expected in an economy highly dependent on the public sector could weaken any recovery.  One hopes that this recovery in the North is not a dead cat bounce.

Rob Kitchin

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