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Facing the Challenges in the Northern Ireland
Housing Market
University of Ulster Belfast Campus
25 March 2009
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PROFESSOR ALASTAIR ADAIR
Pro-Vice-ChancellorUniversity of Ulster
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MR NIGEL SMYTH
DirectorCBI Northern Ireland
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Agenda
• Affordability
• Transactions and stock levels
• How do we stimulate the market?
• Key issues for discussion
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Drivers of Housing Demand
SUPPLY
FINANCE CONFIDENCE / ECONOMY
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CHALLENGESAffordability
• Consumer interest/demand
• Availability of finance
• Tightening of lending criteria in particular level of deposits required
• Lack of innovative equity schemes
• Increase in unemployment risk
• Market uncertainty
• Debt levels
• Managing the media
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Level of Sales across Price Ranges (NI)
0%10%
20%30%
40%50%
60%70%
80%90%
100%
<100,000 <150,000 <200,000 <250,000 >251,000
Price
Pe
rce
nta
ge
Q4/2007
Q4/2008
Source: University of Ulster House Price Index
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0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
All years Data at 31 December 2008
%
£0k
£50k
£100k
£150k
£200k
£250kMortgage Repayment asa % of Gross earnings(90% mortgage)
Mortgage Repayment asa % of Net Disposableearnings (90%Mortgage)House Prices
Sources: DETI, Ulster Bank, Nationwide HPI
House Prices and Housing Costs as a % of combined household earnings
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SOURCING FINANCEIncome Criteria
Abbey• 3.8 Single, 3.8 Joint• Over 20k pa – 4 Single, 4 Joint• Over 25k pa – 4.3 Single, 4.3 Joint• Over 35k pa – 4.8 Single, 4.8 Joint• Over 80k pa – 5.1 Single, 5.1 JointA&L• 4.75 Single, 4.5 Joint
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Halifax• 4.5 Single, 4 Joint
Nationwide • 4.1 Single, 4.1 Joint
Northern Rock• 3.5 Single, 3.2 Joint• Over 17.5k pa – 4 Single,
3.7 Joint• Over 32.5k pa – 4.5
Single, 4.2 Joint
Progressive• 3.75 Single, 3.75 Joint –
90% LTV• 4 Single, 4 Joint – 80%
LTV
Woolwich • 4 Single, 4 Joint –
Normally• 5 Single, 5 Joint – Excellent score
SOURCING FINANCEIncome Criteria
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Bank of Scotland• 4.5 Single, 4 Joint
C&G• 3.05 Single, 1.05 Joint• Over 10k pa – 4 Single, 2.9 Joint• Over 15k pa – 4.4 Single, 3.55 Joint• Over 20k pa – 4.6 Single, 3.85 Joint• Over 25k pa – 4.85 Single, 4.1 Joint• Over 30k pa – 5.25 Single, 4.7 Joint• Over 40k pa – 5.25 Single, 4.75 Joint
SOURCING FINANCEIncome Criteria
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Typical New Home LTV Rates • Abbey – New Build Houses 80%
LTV. New Build Flats 70% LTV• A&L – New Build Houses is 85%
LTV. New Build Flats 70% LTV• Bank of Ireland – All New Builds
75% LTV• Bank of Scotland – Max LTV in
product range is 75%• C&G – All New Builds 80% LTV• Coventry - New Build Houses is
85% LTV. New Build Flats 75% LTV
• Halifax – All New Builds 80%• Nationwide – New Build Houses
90% LTV (max LTV in product range is 85%). New Build Flats 75% LTV
• Northern Bank - 95% and potentially 100% LTV. No restrictions on new builds or apartments
• Northern Rock - All New Builds 85% LTV (Repayment vehicle required also)
• Progressive - Max LTV for New Build Houses is 85%, for New Build Flats is 70%
• Ulster Bank –Up to 90% LTV, 95% with Momentum, co-ownership deal at 100%. No restrictions on new builds or apartments, mortgages have to be on a repayment basis.
• Woolwich – All New Builds 85% LTV
Are these products actually available or are prohibitive criteria preventing lending?
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• Transactions
• Demand in comparison to resale market
• Stock Levels
• Valuation and pricing
• Has the new homes market bottomed out?
CHALLENGESNew Homes market
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Transaction Trends
2005 2006 2007 2008
Qtr 1 2,037 2,166 2,120 896
Qtr 2 2,461 2,285 2,206 1,044
Qtr 3 2,772 2,291 1,480 670
Qtr 4 2,478 2,507 1,669 704
TOTAL 9,748 9,249 7,475 3,314Overall Annual % Change
-5.1% - 19.2% - 55.7%
Source: University of Ulster House Price Index
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0
500
1,000
1,500
2,000
2,500
3,000
Qtr 1 Qtr 2 Qtr 3 Qtr 4
Quarter
Num
ber
2005
2006
2007
2008
Transaction Trends
Source: University of Ulster House Price Index
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New Home Sales vs. Resale Stock Sales Q1 2007 – Q1 2009
(percentage of total sales)
Source: Straw poll results from 3 top sales agents in NI
0
10
20
30
40
50
60
70
80
Quarter
Perc
en
tag
e o
f T
ota
l S
ale
s
NEW HOME SALES
RESALE STOCKSALES
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Total Building Control Applications (Belfast area)
0250500750
1,000
1,2501,5001,7502,0002,250
2006 2007 2008 2009 (to10/3/09)
Year
To
tal
Ap
pli
cati
on
s
Total Applications
Source: Belfast City Council Building Control
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Building Control Applications – Public Housing and Private Housing Speculative
(Belfast Area)
0
250
500
750
1,000
1,250
1,500
1,750
2006 2007 2008 2009 (to10/3/09)
Private Speculative
Public Speculative
Source: Belfast City Council Building Control
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0
200
400
600
800
1000
1200
Quarter
No
Private housing registeredstarts
Private dwellingcompletions
Private Housing, Starts And Completions
(Belfast Area)
Source: Belfast City Council Building Control
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NHBC New Build Registrations /Finals (Completions)
500.0
2500.0
4500.0
6500.0
8500.0
10500.0
12500.0
2003 2004 2005 2006 2007 2008
Registrations
Finals
NHBC statistics: March 2009
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ARE WE SEEING AN UPTURN IN THE MARKET?
The Estate Agents experience
• “The reduction in prices from 30-50% compared to 2007 figures has led to a significant rise in enquiries and sales levels are also improving”
• “Since beginning of 2009, enquiries and viewings have increased by approximately 30% compared to the previous 12 months period”
• “Mortgage approvals have increased by 25% in the first quarter of 2009 compared to the first quarter of 2008”
• “First time buyers are attempting to re-enter the market. Attaining finance is still the main obstacle”
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WOODBROOK LEVEL OF INTEREST (CARVILL GROUP)
0
10
20
30
40
50
60
70
80
90
16/01/2009 23/01/2009 30/01/2009 06/02/2009 13/02/2009 20/02/2009 27/02/2009 06/03/2009 13/03/2009 21/03/2009
Week Ending
Nu
mb
er
of
En
qu
irie
s
A1
A2
A10
A13
T1
T2
T3
T6
T9
315 - 316
TOTAL
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How do we stimulate the market?
• Property Professionals
• Chartered Valuation Surveyors
• Financial Sector
• Government
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Property Sector
• Realistic pricing
• Buyer protection schemes
– Property Developer Guarantees
– Buyer Insurance Protection
• Plan for market recovery and up-skilling in potential growth sectors
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Chartered Valuation Surveyors
What impact are valuations having on today’s
property market?
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Financial Sector
• Building Societies/banks to be encouraged to increase mortgage lending
• More availability of joint equity schemes in partnership with developers to move sales of new homes
• Banks should convey the message that they are open for business and demonstrate that they are lending (on reasonable conditions)
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Government• Does the NI Executive have a robust recovery strategy for
the economic/financial crisis?
• Need to ensure financial support is available for co-ownership
• Work in partnership with the sector to develop innovative options to improve affordability
• Maximise the release of labour-intensive social housing projects
• Need to develop an economic recovery plan for Northern Ireland
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• Affordability – do you agree with this analysis?
• Finance – is there finance available for FTB with 85 – 90% LTV ratios on reasonable terms?
• Valuations – are valuations currently undermining the market further?
• Communications – What are the key messages we need to convey to the public?
• Confidence – what steps are needed to restore confidence to the housing market?
Key issues for discussion