Northern Ireland’s collapse in residential property prices is indeed worse than the Republic’s according to the latest University of Ulster’s house price series for quarter one of 2011 – the report is here and press release here. The report is produced in association with Bank of Ireland and the Northern Ireland Housing Executive (state body which controls 90,000 dwellings and employs 3,000 staff). The latest report shows that its index has fallen from a high of about 950 in Q3, 2007 to 531.51 today, a drop of 44% from peak – it should be said that the peak index is not quantified in the Q3,2007 report produced by the University of Ulster but is shown graphically, the Q2, 2007 index was 930.92 (we are 43% off that index today). In contrast, across the border, the Central Statistics Office say that prices in the Republic have only fallen 39.5% from peak. Indeed when you consider that inflation in the North has been positive for the past three years (there is a helpful graph of the Retail Price Index on the Housing Index graph in the University of Ulster report which evidences this) whereas we have had deflation for most of the past three years, it would seem to emphasise that the residential housing bust in the North has been more severe than here, by which I mean if you strip out inflation and measure real house prices, it seems that the drop in prices in the North is even more severe relative to here than nominal prices.
SoNorthern Irelandhas a more severe collapse in residential property prices, so what you might ask. Well, the North uses sterling as its currency and its monetary policy is set by the Bank of England. On this side of the border, we commonly complain of the ECB sitting on its hands in the 2000s whilst other countries poured cheap euro funds into our banks which then fell over themselves in offering mortgage credit on easy terms. There may be truth to that, but it would seem from our neighbour’s experience that this can’t be the only source of our woes.
As for the detail of the latest University of Ulster series, prices dropped 5.8% in Q1, 2011 and 15% from Q1,2010 but transaction volume picked up with 925 transactions in Q1,2011 versus 684 in Q4, 2010 and 799 in Q1,2010. Prices are now some 44% off peak in Q3,2007. The average price of a dwelling in the North is now GBP £143,918 (€163,519 at today’s exchange rate of GBP 1 = €1.1337). This compares with an average price this side of the border of €191,776 at the end of 2010, according to Permanent TSB/ESRI. The outlook in the North remains challenging according to the latest report.
UPDATE: 20th May, 2011. Although the decline in prices in the North might be greater than the decline in the Republic, it would seem that the declines are in the same ballpark (44% cf 40%). However figures released by the Northern Irish Court Service this morning (and reported here by the Belfast Telegraph) show that repossessions are in a completely different league. Some 542 homes were repossessed in the first quarter of 2011 in the North. That compares with a maximum of 140 in the Republic over the same period. Given that Northern Ireland has some 600,000 households compared to 1.5m in the Republic, it seems that the repossession rate in Northern Ireland is 10x that of the Republic.
NAMA Wine Lake 
What percentage of mortgages in NI property was from ROI banks during the boom? Cheap ECB money may have had an indirect effect in pushing up prices in NI.
@mercureyred, not sure for NI. The UK’s Council of Mortgage Lenders produces market share information but for the UK as a whole, without any regional splits. I have not seen NI separated out in AIB and Bank of Ireland’s financial reporting. If anyone has an answer and source, be grateful if you commented.
What you suggest is a possibility though it would presumably have exposed Irish banks to foreign exchange and interest rate risks.
BoI roll the NI business in with the UK business in their reporting.
AIB do give some breakdown for the NI business which trades as First Trust.
The NI mortgage market is complex: Ulster Bank would be considered the big player with maybe 20%, you have the NI bits of the Dublin banks, also the NI unit of Danske and then all the UK providers who might not even have a physical presence in NI.
From what I’ve seen of repossession cases in NI sub-primers like GE Money also did a fair bit of damage.
@JP, thanks. The entry has been updated with the repossession information published by the Northern Ireland Court Service this morning. Although our property crashes are in the same ballpark, repossessions of 542 in Northern Ireland in Q1,2011 compares with a maximum of 140 in the Republic. Considering the North has just over one third the population of the Republic, the difference in the treatment of arrears between the two jurisdictions is quite stark.
did irish banks not funnel these euro funds up north?
This actually seems about right. I recall a report late last year (though I cannot remember the source) which showed in detail that the repossession rate in the UK overall was 8 times higher than that in the Republic. I think it was a central bank report, but I really don’t remember.
One key point to note here is that Northern Ireland is dealing with its housing bubble the old fashioned way–allowing the bubble to burst, foreclosing on lenders, and making house prices fall to a point where people can afford them. The Irish by contrast are trying, via NAMA, to artificially reinflate their zombie housing market by offerring even more incentives and turfing out almost no-one.
It’s a great gig down here. Put up 20% of the house value, NAMA and the banks put up the rest. Resell if the price goes up, and if it doesn’t, simply hold onto the property indefinitely with little to no fear of being evicted. And people wonder why we’re in this mess.
With the losses made on property developers there is no way on earth that the ‘banks’ in the republic will want to contemplate the same level of losses on residential mortgages…
so they will do everything possible to avoid having to write down the value of a loan until it’s someone else’s problem
and that’s what we see in the figured from the CSO
frankly in 10 years time I wouldn’t be surprised if we discoverer some mortgages being paid at 1c a year and being claimed as performing…
Yep, ObsessiveMathsFreak is correct… down here we have Nama, upward-only rents in the commerical sector, and rent allowances that have not been adjusted to reflect new rents in the residential sector, then there are the moratoriums.
I don’t have any figures, but with the increasing level of mortgage default, how many investment properties are there among them – even empty ones?
Anywhere else the bailiffs would be sent in and we would have a good idea about real prices, but here it seems they will do anything to deny reality.
Hello NWL,
Thanks for another very interesting and educational article.
Do you think that the activities within the ROI Housing Market may have an impact on the prices of property in NI? Is it possible that the pace of the NI burst is slowed by ROI activities to slow the pace of the ROI burst?
ED
@Edmond,
The North is a separate jurisdiction, with different currency, interest rates, central bank, tax arrangements (no s23 as we had on this side of the border), planning guidelines, local authorities, construction costs, financial regulator, lending criteria. Not to mention different economic policies and economy structure. Of course there is free movement of people between jurisdictions.
So if prices on this side of the border change dramatically then on the face of it, I can’t immediately see why the North would follow suit.
I must say that drafting the entry above involved examining the peak to trough fall in the North for the first time and I was surprised that their burst is apparently greater than ours (if you accept the CSO index as the best standard we have). And another time, this might be explored further because the common refrain down here of planning, political decisions, tax breaks, financial regulation all being central to our bubble and crash, may well be true but isn’t is truly amazing that the North has had (so far) an even more severe crash.
As to your last point, yes it must be true that the forbearance measures on this side of the border on the part of lenders together with our draconian bankruptcy and insolvency regimes are slowing the pace of the fall. Our repossession rate is 1/10 of the North’s and our bankruptcy rate is 1/350th of the North’s.
https://namawinelake.wordpress.com/2011/01/01/northern-ireland%E2%80%99s-bankruptcy-rate-per-100000-of-population-is-350x-higher-than-the-republic%E2%80%99s-and-the-us%E2%80%99s-is-2000x-higher-why-are-we-so-different/
“… the North uses sterling as its currency and its monetary policy is set by the Bank of England. On this side of the border, we commonly complain of the ECB sitting on its hands in the 2000s whilst other countries poured cheap euro funds into our banks which then fell over themselves in offering mortgage credit on easy terms. There may be truth to that, but it would seem from our neighbour’s experience that this can’t be the only source of our woes.”
I refer to the above statement. Of course the immediate inference you could draw that in both cases, north and south, we suffer the effect of having our monetary policy set for us elsewhere. Ireland (north and south) is simply not high on the list of priorities by those who wield such influence over our domestic economy. The answer is compelling and obvious: Ireland, both north and south, acting jointly or singly, needs to regain control over our financial and monetary policy or policies. Are we really that different?