Ulster University: House prices in north yet to fall in face of rising interest rates

Images for Quarterly House Price Index. (Photo: Nigel McDowell/Ulster University)
Images for Quarterly House Price Index. (Photo: Nigel McDowell/Ulster University)

RISING interest rates and the escalating cost crisis has slowed home sales in the north, but new research from Ulster University has found it has yet to produce any meaningful fall in house prices.

The university found the average price of a home in Northern Ireland actually increased by 1.3 per cent in the fourth quarter of 2022 to £207,327.

The index uses different methodology from the officially recognised NI house price index, produced by Land & Property Services (LPS), which put the average house price at £176,131 for the third quarter of 2022.

Ulster University’s research found that despite attempts by the Bank of England to get a handle on inflation by increasing mortgage interest rates, the heightened affordability pressures for potential buyers has reduced market activity yet there has been no decline in overall house prices.

There was some evidence that recent events have had an impact on some sectors.

The average price of a terrace/townhouse fell 4.1 per cent between the third and fourth quarter to £134,440, according to the UU index.

The detached sector also showed a marginal decrease of 0.2 per cent to £292,773.

But the university’s research showed the average price of an apartment increased by 5.6 per cent to £158,300 between the third and fourth quarters of last year, while semi-detached homes increased by 1.7 per cent to £190,882 on average.

Lead researcher Dr Michael McCord, said: “There are signs of purchaser demand and sentiment weakening invariably due to consumers adopting a ‘holding position’ to see whether interest rate increases have peaked and what appears to be the beginning of an easing inflationary environment.

“The housing market, to a certain extent, continues to be protected from any severe price correction due to the ongoing imbalance between demand and supply and the chronic lack and quality of private rental stock.”

Ursula McAnulty, head of research at the Housing Executive, which commissioned the research, described 2022 as “tumultuous”.

“Pricing levels overall have shown remarkable resilience, particularly in the context of high inflation and rising interest rates,” she said.

“This resilience is, partially at least, the result of supply side issues within the housing market, although the sub-regional variation in house price growth, and the continued slowdown in buyer enquiries and activity, somewhat dampen this view.”

Meanwhile, a separate study published on Thursday showed downward trends in demand, sales and listing across the Northern Ireland housing market in January.

The monthly residential market survey from the Royal Institution of Chartered Surveyors (Rics) and Ulster Bank, showed a continued decline in property professionals reporting new buyer enquiries.

January was the seventh consecutive month the survey detected falling new buyer enquiries.

New instructions to sell also fell for the fifth consecutive month.

Samuel Dickey, spokesperson Rics in the north, said: “As expected, the lack of stock coming onto the market continues to be an issue. Some potential buyers are giving careful consideration to purchasing, which is unsurprising given the current market landscape, including interest rate movements. We are also seeing respondents reporting demand scaling back from highs last year.”