The cost of living crisis, rising interest and mortgage rates and ever-increasing economic and political uncertainty in Northern Ireland appear to be dampening activity in the housing market, according to the latest research from the University of Ulster.
Quarterly House Price Index results show that despite another quarter of consecutive house price growth, rising consumer costs and interest rates are causing household budgets to continue to squeeze , and this has started to impact market activity, with a third of real estate agents reporting a reduction in new inquiries in selected market areas between the first and second quarters of 2022.
The report also found that while 86% of agents expect prices to either stay largely the same or see ‘lower’ price inflation over the next three months, the housing market in Northern Ireland is approaching a peak. ‘activity. Ongoing demand and supply challenges remain, but the longer-term picture foresees lower transaction levels as inflationary pressures and rising consumer costs are expected to have a greater impact on the local market for lodging.
The Quarterly House Price Index, produced by the University of Ulster in partnership with the Northern Ireland Housing Executive and the Progressive Building Society, analyzes the performance of the housing market in Northern Ireland during the second quarter of 2022 (April – June).
Other key findings of the report include:
Quarterly house price growth of 3.6% from Q1 2022, with annual growth of 5.6% from Q2 2021. The average price stands at £205,628.
The Terrace/Townhouse sector posted the highest annual price change of 6.9% from Q2 2021, with the average price now standing at £138,942;
The semi-detached sector shows comparable annual price growth of 6.3% with an average price now of £187,861;
The detached sector posted annual price growth of 4.6% and the average price is now £291,071;
The flats sector is showing the weakest annual growth compared to this period last year, at 2.8% with an average price now at £147,594.
Presenting the findings, lead researcher Dr Michael McCord, Reader in Property Valuation at Ulster University, said: “The housing market this quarter continues to show signs of price growth, albeit at a decreasing pace relative to observed quarterly and annual price changes. since the end of the confinement periods. The tailwind that blew through the market after the pandemic, supported by strong levels of demand, appears to be weakening.
“With strong headwinds ahead in terms of inflationary pressures, the cost of living crisis, rising interest and mortgage rates and broader political and economic uncertainty, there is growing uncertainty regarding stability in future price levels The supply crisis appears to have been a key factor in supporting the housing market, and this could serve to “soften” any potential correction as the market returns to long-term activity levels term and more normalized in the second half of 2022.”
Ursula McAnulty, head of research at NI Housing Executive, which commissions the research, continued: “The strong house price growth seen in 2021 continues, albeit at a slower pace, into 2022. However, there are has emerging signs of declining buyer confidence, including a drop in buyer inquiries. With the Bank of England predicting inflation to hit 10% in 2022, the cost of living crisis is expected to continue to affect households in Northern Ireland. It remains to be seen to what extent the lack of supply will temper the effect on house prices, although inevitably there will be more stability in house prices over the remainder of 2022.”
Michael Boyd, Deputy Managing Director and Chief Financial Officer of Progressive, added: “After a prolonged period of market momentum, momentum in the Northern Ireland housing market continued in the second quarter of 2022 with quarterly price growth of 3.5%, but with indicators indicating that market activity levels are starting to cool.
“As expected, the influencers of inflation and consecutive interest rate hikes are expected to dampen momentum in the period ahead, with the majority of agents expecting lower sales volume. Current market prices are expected to be maintained, at least in the short term, thanks to rising construction costs and the continuing imbalance between supply and demand.
“As we enter the second half of 2022, consensus among agents predicts a return to more stable market momentum, with fewer sell orders and fewer buys expected over the next three months. Long-term double-digit inflation forecast by the Bank of England for the fall and continued pressure from households will likely impact transaction levels with a more cautious buyer landscape.