Facing the Challenges in the Northern Ireland

Housing Market

University of Ulster Belfast Campus

25 March 2009

PROFESSOR ALASTAIR ADAIR

Pro-Vice-ChancellorUniversity of Ulster

MR NIGEL SMYTH

DirectorCBI Northern Ireland

Agenda

• Affordability

• Transactions and stock levels

• How do we stimulate the market?

• Key issues for discussion

Drivers of Housing Demand

SUPPLY

FINANCE CONFIDENCE / ECONOMY

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

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

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

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

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

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

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?

• Transactions

• Demand in comparison to resale market

• Stock Levels

• Valuation and pricing

• Has the new homes market bottomed out?

CHALLENGESNew Homes market

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

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

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

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

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

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

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

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”

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

How do we stimulate the market?

• Property Professionals

• Chartered Valuation Surveyors

• Financial Sector

• Government

Property Sector

• Realistic pricing

• Buyer protection schemes

– Property Developer Guarantees

– Buyer Insurance Protection

• Plan for market recovery and up-skilling in potential growth sectors

Chartered Valuation Surveyors

What impact are valuations having on today’s

property market?

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)

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

• 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