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Facing the Challenges in the Northern Ireland Housing Market

Facing the Challenges in the Northern Ireland Housing Market. University of Ulster Belfast Campus 25 March 2009. PROFESSOR ALASTAIR ADAIR Pro-Vice-Chancellor University of Ulster. MR NIGEL SMYTH Director CBI Northern Ireland. Agenda. Affordability Transactions and stock levels

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Facing the Challenges in the Northern Ireland Housing Market

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  1. Facing the Challenges in the Northern Ireland Housing Market University of Ulster Belfast Campus 25 March 2009

  2. PROFESSOR ALASTAIR ADAIR Pro-Vice-Chancellor University of Ulster

  3. MR NIGEL SMYTHDirectorCBI Northern Ireland

  4. Agenda • Affordability • Transactions and stock levels • How do we stimulate the market? • Key issues for discussion

  5. Drivers of Housing Demand SUPPLY FINANCE CONFIDENCE / ECONOMY

  6. 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

  7. Level of Sales across Price Ranges (NI) Source: University of Ulster House Price Index

  8. House Prices and Housing Costs as a % of combined household earnings Sources: DETI, Ulster Bank, Nationwide HPI

  9. 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 Joint A&L • 4.75 Single, 4.5 Joint

  10. 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

  11. 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

  12. 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 Typical New Home LTV Rates Are these products actually available or are prohibitive criteria preventing lending?

  13. CHALLENGESNew Homes market • Transactions • Demand in comparison to resale market • Stock Levels • Valuation and pricing • Has the new homes market bottomed out?

  14. Transaction Trends Source: University of Ulster House Price Index

  15. Transaction Trends Source: University of Ulster House Price Index

  16. 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

  17. Total Building Control Applications (Belfast area) Source: Belfast City Council Building Control

  18. Building Control Applications – Public Housing and Private Housing Speculative (Belfast Area) Source: Belfast City Council Building Control

  19. Private Housing, Starts And Completions (Belfast Area) Source: Belfast City Council Building Control

  20. NHBC New Build Registrations /Finals (Completions) NHBC statistics: March 2009

  21. 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”

  22. WOODBROOK LEVEL OF INTEREST (CARVILL GROUP)

  23. How do we stimulate the market? • Property Professionals • Chartered Valuation Surveyors • Financial Sector • Government

  24. Property Sector • Realistic pricing • Buyer protection schemes • Property Developer Guarantees • Buyer Insurance Protection • Plan for market recovery and up-skilling in potential growth sectors

  25. Chartered Valuation Surveyors What impact are valuations having on today’s property market?

  26. 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)

  27. 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

  28. Key issues for discussion • 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?

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