If Carlsberg did property collapses…then you would expect the collapse in the value of residential property prices in the Republicof Irelandbetween 2007 and today to be close to tops. After all, that is what the league table of Reinhart and Rogoff’s global property busts tells us. Adjusting the figures below which are from 2009 to 2011, theRepublic ofIreland would be in second place after Hong Kong 1997-2003.
The Republic’s bust has seen property decline 49.9% from peak in nominal terms, that is taking the actual settled price in 2007 and the actual settled price today. In real terms, taking into account the fact that inflation should have pushed up the price of our property by 1.9%, our residential property has declined 50.8%. Which is a colossal decline, and the betting is that nationally we have further falls in prospect.
But over the Border in Northern Ireland, there’s an underappreciated phenomenon unfolding with prices there having declined by 54% in real terms. This morning the quarterly University of Ulster/Bank of Ireland house price series has been released and it shows that the average settled selling price of a home in Northern Ireland in Q1, 2012 was GBP 134,560 (€168,347) which represents a decline of 1.9% from the previous quarter and a decline of 46.3% from the peak of GBP 250,400 (€313,274) in 2007.
On this side of the Border, the publication last week of the Central Statistics Office monthly residential property price index showed that prices here have decline 49.9% from peak and given our peak price of €313, 998 according to the PTSB/ESRI index, that indicates national prices here today of €157,360. So the nominal decline in the Republic is greater than inNorthern Ireland, which might be expected.
But if you consider inflation in the Republic is a mere 1.9% since the peak whilst in the UK it is a staggering 16.7%, the real decline in the Republic is 50.8% and in Northern Ireland, it’s 54% which would appear to be world record, at least according to the Reinhart and Rogoff league table.
Given that Northern Ireland doesn’t have a major problem with vacant property unlike the Republic – its vacancy rate is 7% which is pretty much in line with international norms whilst ours is 14%; given that Northern Ireland has an unemployment rate of 6.8% which is one half of ours and given their banks are no worse and are probably in better condition than ours, isn’t it truly remarkable that their property crash is worse than ours?
Of course in the Republic we have oversupply but there is suspicion that it is being withheld from the market by banks and developers who don’t wish to crystallise losses on loans. Although our mortgage arrears problem has become a crisis with 15% of mortgages in arrears or restructured, and with one in 13 mortgages in arrears for more than six months, there is massive forbearance on this side of the Border with repossession rates on defaulting mortgages running at a level of less than a quarter that of Northern Ireland. It is likely our draconian bankruptcy regime and forbearance is preventing repossession and sale of homes whose mortgages are unsustainable. Our banks aren’t lending for new mortgages as revealed a fortnight ago with just 2,200 new mortgages for home purchase approved in Q1, 2012.
Elsewhere theNorthern Ireland survey shows that transactions in the quarter remained at a low level of 925, down from 960 in the previous quarter. The authors of the report – Professor Alastair Adair, Professor Stanley McGreal and Dr David McIlhatton – said: “We consider the generally weaker market in the first quarter of 2012 reflects a lack of confidence arising from the poor performance of theUK economy, with buyers still deferring decisions because of economic uncertainty, rising bills and concerns about job security.” Hmmm, what’s the outlook on this side of the Border.
NAMA Wine Lake 
Northern Ireland’s resilience may have a lot to do with the fact that they have a much better housing programme than we do. It is administered by the Northern Ireland Housing Executive (previously The Northern Ireland Housing Trust). Up to now, Northern Ireland relied far more on the State for the provision of both housing and jobs than we did. That fact shielded many of its people from the worst effects of the fallout from the property bubble.
The Northern Ireland Housing Executive is a non-departmental public body, originally established by the Housing Executive Act (NI) 1971 ( since superseded by the Housing (Northern Ireland) Order 1981). Under the terms of the Act, the Housing Executive assumed the housing responsibilities of 65 separate authorities and is Northern Ireland’s single comprehensive regional housing authority.
It consists of a 10 member board, including Chairman and vice-Chairman and is supported by a Chief Executive and under 3,000 staff who manage just over 100,000 dwellings. It has an annual budget of over £750 million.
In addition the Housing Executive is the Northern Ireland’s Home Energy Conservation Authority and also administers the Housing Benefit Scheme, which provides help with rent to people on low income.
http://www.nihe.gov.uk/
P.S. … And let’s face it, the canny Scots-Irish are far better business people than we are. They didn’t build to excess – like a drunken sailor.
Really? Are there any other areas of B & I more subsidised than NI & Scot?
Plus you’re unfair on drunken sailors – the money they spend is their own.
@SG, “Are there any other areas of B & I more subsidised than NI & Scot?” Answer: Not that I am aware of. A fair point.
Drunken sailors? Touche! :-)
There are two things that drive the housing market, credit and the ability to pay for it. Supply and demand, not so much. Both Ireland and Spain were world champions at overbuilding, but prices kept climbing even when supply was way ahead of demand. The price of a house can fall to 100 euros but if you are broke and unemployed, so what. Spain is having its Irish moment with the dirty laundry coming out. The problem with Spain, like Ireland, is that the size of the problem is too large to be backstopped by the state, a la Cowan era. As Spain foretold the last great European calamity, it looks like they are on target for the next.
The new NISRA index which is based on stamp duty returns, rather than an EA sample, suggests the drop may have been even more pronounced.
Click to access NI_RPPI_Q12012statisticalpressnotice.pdf
In the north we were only saved from enormous overbuilding by what was attacked at the time as an ‘inefficient’ planning service. Inefficient meaning ‘won’t immediately green light a 200 unit development in a semi-rural location with an inadequate sewage system.’
[…] piece of analysis from Nama Wine Lake on Northern Ireland’s collapsing residential property market : …in Northern Ireland, there’s an underappreciated phenomenon unfolding with prices there […]
The NI market must have alot to tell us – like the intersection in a Venn diagram, between Ireland/UK + €/£.
I work in debt on the south coast of England and the anecdotals I hear from the lower end of the residential market are completely at odds with the price indexes. FTBs are gone, BTL is the current fad (again!), builders who survived 2008 are still in grim mood, SVRs are only going up, forebearance is legion, state housing & planning policy is … who knows?
My guess is the deval of £ is making people steadily poorer, but the slack is being taken up by flight-to-safety investors from abroad – but not for NI.
Can anyone explain that little bit of the Venn?
[…] the "UK' bracket in surveys, it would've recorded the biggest property collapse in the World. Northern Ireland Also, I believe Lurgan /Craigavon area have the lowest house price average in the North. […]