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| Graph 1 - Source: ONS (2011) & Nationwide (2013) |
Up to 2009, housing prices were still declining within Northern Ireland according to Graph 1, while gross disposable household income was gradually beginning to recover. Attanasio et al. (2009) discovered that consumption should correlate with movement in house prices; however it was found that during a boom and briefly following a bust, they will deviate away from each other.
Up to 2009, housing prices were still declining within Northern Ireland according to Graph 1, while gross disposable household income was gradually beginning to recover. Attanasio et al. (2009) discovered that consumption should correlate with movement in house prices; however it was found that during a boom and briefly following a bust, they will deviate away from each other.
Up to 2009, housing prices were still declining within Northern Ireland according to Graph 1, while gross disposable household income was gradually beginning to recover. Attanasio et al. (2009) discovered that consumption should correlate with movement in house prices; however it was found that during a boom and briefly following a bust, they will deviate away from each other.
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| Graph 2 - Source: Nationwide (2013) |
Graph 2 presents the status of the UK house market on a
regional basis. Northern Ireland has quite a prominent difference in comparison
to the UK average and other regions which have followed a similar line to the
UK. Norwood (2008) cites that house prices leading up to 2008 had grown around
160% over five years, three times the rest of the UK. Combining the crash in
house prices and low economic growth across the UK, Northern Ireland felt a
multiplier effect with construction of affordable social housing almost halted
and soaring unemployment. An economist from the Bank of Ireland, cited by
Norwood (2008) said that the market was “stricken with relative inactivity uncertainty
and nervousness over valuations"
However there was a silver lining out of this. First time buyers
rejoiced as the housing bubble burst, with property values dropping and
interest rates at record level lows housing affordability was once again in the
grasps of the first time buyer.
In their study, McGreal, Brown & Adair (2010) targeted
the Belfast Metropolitan area to decipher the factors that caused such a
massive collapse of the housing market. They identified that the key driving
force for the expansion of the bubble or at least the foundations for it, was
the growth of income, very low unemployment, low interest rates and strong
macro-economic influences from the UK accompanied by cross border investment relations
with the Republic of Ireland.
McGreal, Brown & Adair (2010) results demonstrate the
deviation from the asking price of houses and the actual sale value which I
have attached, as Appendix 1 & 2. From these results they were able to pinpoint when the bubble
was vigorously expanding as the both the asking and the sale value prices
shared similar tracking during normal market conditions while during a bubble
values where higher and more varied.
Attanasio, O.P., Blow, L., Hamilton, R. And Leicester, A.,
2009. Booms and Busts: Consumption, House Prices and Expectations. Economics,
76(301), pp. 20-50.
McGreal, S., Brown, L., & Adair, A. (2010). List price
and sale price variation across the housing market cycle. International Journal
of Housing Markets and Analysis, 3(2), 89-99. doi: http://dx.doi.org/10.1108/17538271011049731
Nationwide, 2013. Housing Price Index (HPI). 1. England:
Nationwide.
Norwood, G 2008, 'PRICES HEAD DOWNHILL', Estates
Gazette, 820, pp. 99-101, Business Source Premier, EBSCOhost, viewed 28
February 2013.
Office of National Statistics, 2011. Regional Gross
Disposable Household Income (GDHI) 1995-2009. 3. England: Office of National
Statistics.
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| Appendix 1 - List Price vs Sale Price |
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| Appendix 2 - Standard deviation between list price and sale price |
