Spending cuts will hurt housing market growth
Public sector spending cuts are likely to put pressure on Northern Ireland’s already subdued housing market and ensure it lags behind the rest of the UK, according to a poll of property professionals.
The Royal Institution of Chartered Surveyors said its monthly survey indicated there had been a mild improvement in prices and enquiries from potential buyers in May.
However, it also warned that transaction activity remains low and the province’s price balance — the number reporting a rise in prices minus those reporting a fall — at -18 was well behind other UK regions.
With the majority of respondents reporting flat prices, RICS Northern Ireland spokesman Tom McClelland cautioned that the billions of pounds in spending cuts set to be unveiled in next week’s emergency Budget are likely to heap pressure on the housing sector.
“There remain big sectoral and geographical variations in the local market and the likelihood is for this to continue during the remainder of the year.
“On the whole, the scale of public spending cuts that are to come will impact on Northern Ireland significantly, creating a difficult environment for the housing market,” he said.
“Unemployment will remain high for some time and increasing pressures on household budgets, such as water charging and rises in interest rates, will also inevitably come.”
The Executive has already implemented £370m of spending cuts to the budgets of Stormont departments, while another £128m in savings are already in the works as part of £6bn in cuts already announced by the coalition Government in Westminster.
Chancellor George Osborne is widely expected to announce further austerity measures next week.
RICS has forecast a prolonged period of largely flat average house prices in Northern Ireland rather than another big decline of the kind seen during the property crash two years ago.
Transaction activity in May was flat, with 38% of surveyors seeing no change in the number of sales and the rest evenly split between those seeing rise and falls.
Nearly three quarters also said prices were flat, although 24% reported lower house prices.
On the upside, expectations for prices and transactions between June and August also improved marginally into positive territory, the study found.
Derek Wilson, head of lending products at Ulster Bank, which sponsors the survey, added:
“The expected headwinds will bring challenges for the housing market, but a range of indicators are pointing to evidence of increasing stabilisation.
“This is leading to an expectation that pent-up demand from those who have been putting off a home purchase will start to be realised.”