As with other parts of the UK, the last 18 months have seen a period of exceptional market activity in the living sector in Northern Ireland, despite the economic challenges of Covid. Much of that activity has in fact been driven by the societal challenges and behavioural shifts brought about by the pandemic.
Northern Irish “ex pats” (particularly those in London and the South East) have been returning to Northern Ireland in unprecedented numbers with their “deep pockets” and are snapping up large, detached properties in some of Northern Ireland’s most desirable and expensive locations. As such, supply for quality stock continues to out strip demand and the market continues to run “hot”.
This is due in part to a demand and supply imbalance, which already existed prior to the pandemic but which has now been intensified by our collective prioritisation of the need for more space and greater flexibility from our living environment.
The delivery of new homes in Northern Ireland continues to be subject to various development constraints, including chronic delays with the planning system and under-capacity in the sewerage network, which has halted new developments in some parts of Northern Ireland. At present, around £55m worth of infrastructure projects, including upgraded wastewater treatment works and new water mains, are not being delivered due to public expenditure cuts.
The global shortage of skills and materials is also being felt by the construction industry in Northern Ireland. This has led to spiralling costs and prices which, in turn, has fuelled the ‘build to rent’ market as an alternative residential supply. The lifestyle and economic considerations driving the BTR boom elsewhere in the UK apply equally in Northern Ireland, but there are also some local factors at play. Due to historical reasons, the residential market in Belfast city centre is under-developed but is an issue that Belfast City Council is determined to change. The requirement for 6,000 homes in the city centre has been identified as part of its emerging local development plan and it is acknowledged that the private rented sector will be integral to achieving this objective. Local market research indicates that young professional renters - generally graduates accustomed to purpose-built student accommodation - will drive demand for new purpose-built rental properties.
“The “brain drain” that once characterised the career choices of many of Northern Ireland’s most talented young people is already being stemmed by the emergence of Belfast as a cosmopolitan and exciting city for people to live and work.
The provision of high-quality accommodation for these young professionals will only help retain this talent in Northern Ireland which, in turn, will help incentivise institutional investors to invest in this sector.
A further UK trend that is being mirrored in Northern Ireland is the move towards “smart homes” which include “green” features such as onsite electric vehicle charging points. There are only a couple of such private housing developments in Northern Ireland at present, but this looks set to change with the government-backed drive towards carbon net zero and a vested interest from stakeholders across the board. The trend in funding affordable housing in Northern Ireland is also evidenced by the recent announcement by bLEND, a subsidiary of The Housing Finance Corporation, of its first social bond for a Northern Irish housing association in line with bLEND’s recently established Social Bond Framework, which aligns with the Sustainability Reporting Standard for social housing.
This article appears in our Investing in Living report. To access the full report, please click on the link to the right of this page.
Disclaimer
This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2024.