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Property market is stagnant as prices fall further, says survey
Tuesday, 18 November 2008
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Some estate agents in Northern Ireland have been unable to sell a single property in the last few months as prices plunge even lower, a survey warned today.
At least a tenth of estate agents reported no transactions between July and September, with many others disposing of only a handful of properties.
The cost of the average house fell by more than 15% from a year previously, the University of Ulster said.
Report author Alastair Adair said: "The impact has been severe on the local housing market, with prices down considerably.
"In addition, the volume of transactions has been eroded further, notably in the resale market where many sellers are adopting a wait-and-see approach."
There were only 670 sales across the country, less than half during the same period last year.
The number of disposals was low across the west of the province and most areas were affected by falling prices.
Head of research at the Bank of Ireland Alan Bridle said the journey to more affordable housing continued.
"The market remains in the grip of a negative mindset, with the outlook for further falls.
"We could see a decline towards around £175,000 in the average house price during the first half of next year."
The number of sales have been low for a year and a half. Today's University of Ulster/Bank of Ireland/Housing Executive Quarterly House Price Index of 120 estate agents showed the average price was £203,775, compared with more than £250,000 in the third quarter of 2007.
A UU spokesman said at least a tenth of firms reported no sales during three months, with many other offices having fewer than five.
Bungalow prices were among the worst affected over the last year, while apartment costs rose by 10%.
Terraced and town houses fell by a quarter and detached houses dropped by 17.5%.
Housing Executive head of research Joe Frey said: "The irrational exuberance of the 18 months before the summer of 2007 was a serious aberration in terms of the longer-term development of a sustainable housing market.
"We need to ensure scarce resources are focused on providing a safety net by building enough new social dwellings and alleviating the pain of those directly affected by the downturn through for example the proposed mortgage rescue scheme."
Belfast fared better than most areas because of the relative strength of the apartment market. Overall averages were down 5%. South Belfast was most expensive.
North Down costs fell by a quarter, with the decline accelerating. The north coast was also badly affected.
Patrick Palmer, a partner at Templeton Robinson estate agents, said he hoped for better news next year.
"It has been difficult. Our rate of transactions are down but 99% of businesses out there are suffering.
"Every estate agent out there is suffering, we have had to make people redundant, we have to face the facts, there is nothing we can do.
"There is a confidence thing, we have to be realistic about it. Next year there will be more business than last as a result of the interest rate cuts and more money in the system."
He said it would be spring 2010 before a real upturn began.
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36 Comments
Mary, perhaps you could enlighten us as to who would be able to afford to buy property if it increases way above wage increases? Every increase above wage inflation reduces the pool of people able to buy. The main reason prices are collapsing so fast in NI is because they are so unaffordable. I welcome the falls to more affordable levels - it will help our economy in the long run.
Posted by jack | 19.11.08, 12:50 GMT
Mary, perhaps you could enlighten us as to who would be able to afford to buy property if it increases way above wage increases? Every increase above wage inflation reduces the pool of people able to buy. The main reason prices are collapsing so fast in NI is because they are so unaffordable. I welcome the falls to more affordable levels - it will help our economy in the long run.
Posted by jack | 19.11.08, 12:12 GMT
@Baz
you can't just dismiss the rent/price ratio. this is consider as the fundamental for house prices.
That you are ready to pay more for your house is good for you. And one could expect a premium to ownership, but 100% ? that does not seems sensible to me...
and as far as security's go, a lot of people who overstretches themselves will sure disagree...
Price in NI have no reason to be more expensive than those in the South East of England...
Posted by AR | 19.11.08, 11:36 GMT
Lets all have an average salary of £50k and all will be forgiven.
Someone out there was very insulting, particularly to certain categories of worker.
Such comments should have been withdrawn and not allowed to be posted on this site.
The author ought to think about libel laws before going on paper with such defamatory comments.
Posted by BJ | 19.11.08, 10:32 GMT
The house price as a simple multiple of the rent is nonsense. Owning your own home rather than renting somebody's house from them is much more preferable and because it is preferable it comes at a premiuim. So the cost of owning the house that you currently rent should be a lot more.
You get married, you have a family, you get your kids settled in a school - then you get told that you have to move out of your home because your landlord has decided he wants you out of his house. Not nice.
Having the security of owning your own home, which in the long term is always an appreciating asset, costs extra. Accept it.
Posted by Baz | 19.11.08, 10:13 GMT
@Capitalist
you are right when you say that house can be seen as an investment. how do you calculated the price of such an Asset ? you use the rent.
you probably would expect a could yield of 10% to cover the risk and maintenance.
that means that a house you can rent 750 would be worth
Ready ?
ouch 90 000 quid, but if you think that 10% is a too much asking, you would agree that 6% is a real minimum - I think you would lose money but ... - that's 150000.
here you go that's you valuation ...
I rent at 750 and the flat was on the market at more than 300 000 crazy ... the brand new one in TQ were on sale for 250 000.
Posted by AR | 19.11.08, 08:00 GMT
Any "capitalist" knows that markets are cyclical...what goes up must go down and vice versa... and that banks only lend when they can get a safe return on their investment...afterall they are in the business of making money...not losing it by lending to individuals who can't afford to pay it back...ergo the relevance of price to income ratio. The "markets" are driven by macroeconomics not by a few individuals being 'paid a fortune.'
Posted by New Yorker | 19.11.08, 00:45 GMT
Capitalist several points
1: income ratios are only indicative of what people can afford to pay for property ie its real value. The value of any investment will ultimately be based on what someone is willing and able to pay for it ie what it is really worth.
2: If this is exceeded; ie the NI housing market this is called a bubble and it will eventually burst just like the Tech bubble and many others before it.
3: For sustainable long term growth in the housing market house prices will only increase relative to wage as this will indicate what someone can afford and is willing to pay.
4: The banks are not helping 1st time buyers ie credit scores needed are increasing and you need at least 10% deposit. THIS IS capitalism in action. The banks have realised that property is overvalued in relation to sustainable long term growth and have withdrawn from the market until they view it as having value again. Banks don't care about joe public or joe capitalist.
Posted by David | 18.11.08, 21:35 GMT
It could take 20 years to get back to the top bubble price. Its a buyers market now and will remain for the foreseeable future.
Posted by Patrick | 18.11.08, 21:08 GMT
Jack, how is a property crash 'fantastic news for the young people of Northern Ireland?' A crash means thousands of 'normal' people - young and old (who have scrimped and saved for years to get on the ladder) are plunged into negative equity, which in turn stimulates panic and affects the wider financial markets. Banks will not lend anymore, especially to 'young people' who have poor credit ratings and an inability to save. As regards 'greedy investors', they are the reason why your rent has remained low over the years. Fewer buy-to-let landlords means less rental property available and higher rents as a result of demand outstripping supply. The spoilt generation must realise that it is called a property 'ladder' for a reason and should lower their expectations, re-first buys. Buy a 90k one-bedroomed flat in an unfashionable area if you cannot afford your 175k city bachelor pad.
Posted by bhamilton, London | 18.11.08, 19:20 GMT
I believe that the housing boom will return it keeps the ecomony going and I belive that this will and should happen. Yes I want to live the dream of owing property and to know that it will apprecite rapidly thats how it is done all over the world----it should happen in NI. Living the dream owing real estate .......and making profits on it thats how it done.
Posted by Mary | 18.11.08, 18:19 GMT
"Why should i be losing cash on my property so some burger flipper can afford to swan about it watching daytime tv!"
ANSWER: Because the other 99.99% of people that dont flip burgers nor watch daytime tv OR Fight and argue OR shout every other sentence, that usually earn less than a "fortune", can afford to get a property. And if they can, just about get one, can barely afford the neccessities like food etc after morgage payments and prey that interest rates dont go up deavestating there lifes dont have to worry as much if they buy.
"Price to income ratio nonsense..."
COMMENT: Why did the worldwide economic crisis start? If anyone doesnt know the answer, read the front pages of any newspaper any day, or most of the answer is in the quotation above.
I hope they fall atleast the same again from there peak so those of us that dont fight or make a fortune can get on the proprty ladder - even those that work in McDonalds and Burger King or work night shifts and watch daytime tv!
Posted by Lee | 18.11.08, 18:15 GMT
Property is just like any other commodity really. If you can't afford it, you must do without. Simple really.
Posted by Bill | 18.11.08, 17:53 GMT
Im not convinced a real recovery will be made. There are so many factors against it. I dont buy into the theory "What goes up, goes down" and vice versa. and the last people to listen to are estate agents and the Govt run media.
Posted by StephenMc | 18.11.08, 17:50 GMT
Welcome to "real life"in Great Britain to all those whingers who now have to live without the handouts from the Goverment.
Market forces equal market prices Northern Ireland still has a long way to go catch up with the rest of Britain so pay up for your living accomodation and get used to the idea.
Posted by capitalist2 | 18.11.08, 17:42 GMT
Dr Lucy- I think your comments are selfish and senseless. What you completely fail to grasp is that the value of your asset is simply what someone else is a) willing and b) able to pay for it. We had a property bubble in 06/07, fuelled by greedy investors who failed to recognise that their actions pushed prices to unsustainable levels - prices that the local population could not, and can not, support with their earning power. I also think your comment of "get a job" is insulting, given that less than 20% of the NI population earn over £32,000, which is the level of income you need at the moment to even contemplate buying anything.I think most working people in NI would find your remarks disgraceful. However much you hope and wish, house prices will not bounce back to 2007 levels for many years because they will eventually grow in line with wages, not in line with a once in a life time foolish investor frenzy. It was the boom that caused the crisis, not the crash. Its called overheating
Posted by Jack | 18.11.08, 17:15 GMT
"He said it would be spring 2010 before a real upturn began." - Patrick Palmer
I doubt it Patrick - you didn't see this happening in the first place, so what makes you think that there will be an upturn?
After Japan's real estate bubble burst, prices dropped for a decade. And this is Japan, world leader in electronics, innovation and allsorts.
Northern Ireland is a different case altogether - sorry if I'm not talking the place up - but if you haven't noticed - the economy here is small, weak and dominated by the state-sector.
Regarding what happens when you retire and still rent...
Well what happens when you retire and still own a house? do you have to take bricks out of the walls to pay for food, petrol etc...?
There are smarter things to do with your money than invest in a falling asset like property.
Posted by bobby d'hofter | 18.11.08, 17:05 GMT
The only people losing out from the housing crash are the people who well deserve it, the developers, speculators, fly by night estate agents that've sprung up,amateur buy to let landlords and the others who saw the boom as a way to make quick cash from our money at our expense. despite the wishful-thinking articles that appear now and again that the worst is over , always written by people with a vested interest in exhorbitant prices, all the signs show the downward spiral continuing for the foreseeable future.
Posted by paulo | 18.11.08, 16:46 GMT
It's all about price to income ratio and jobs. If average NI salary is 25,000 than average NI house should be 3x to 4x times that - 75,000 to 100,000 max. Plus you need employment to continue.
Banks are being forced back into the basics of lending. Housing prices will continue to decline for the next couple of years...as well they should...the run up of the last few years was unrealistic and unsustainable.
Affordable housing will ultimately make NI more attractive for business which will benefit everyone. Here's to property owners accepting the inevitable and moving on...no pun intended.
Posted by New Yorker | 18.11.08, 16:17 GMT
David. Sounds great. But what about when you retire and your income drops and you can no longer afford the rent and you have nowhere to live because you have not planned ahead that far? Living for the moment is great at the time, but reality bites sooner or later.
Posted by Richard | 18.11.08, 16:15 GMT
36 Comments