Perusing the latest figures from the Department of Communities and Local Government wouldn’t usually arouse any hint of excitement for any sane person.
However, upon the release of its latest statistics, cataloguing the state of the market in April, there was one number which may have had you reaching for the glasses and shunting your chin away from the desk towards its usual place below your nose.
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According to official figures, house prices in the 12 months to April 2007 grew in Northern Ireland by 54.1 per cent, compared to a UK-wide annual average growth of 11.3 per cent. Whichever way you look at it, that is astounding. Levels of house price growth in the province have been unabating for a while now and what was one of the cheapest places to buy in the UK now sits well above the UK average price of £209,454 at £228,208. Only London and the South East have a higher average property price.
While this may be good for existing property owners, as average prices have risen from £119,956 in February 2005, a 90 per cent-plus increase in 26 months, those looking to get on the ladder have been increasingly squeezed out of the market. So much so, according to the Council of Mortgage Lenders (CML), that first-time buyers (FTB) have fallen to their lowest level since 1980, with only 8,000 purchasing in 2006.
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According to Ken Sives, partner at Sives Financial Services, the sums just don’t work any more. “If you consider the average house price near where I am based is over £200,000 and when the normal wage for those people is around £15,000, the calculation simply doesn’t work. The only people you see buying now are those with very hefty deposits. Maybe one in 10 of the people I see are FTBs; and it may not even be that.”
Something must be done
This ‘crisis’ in affordability means there is near-unanimity that something has to be done, with the CML demanding that the Northern Ireland Assembly position housing as one of its top priorities.
The chairman of CML Northern Ireland, Derek Wilson, said: “The CML urges the Northern Ireland Assembly to address affordability constraints by implementing some of the reforms proposed in Sir John Semple’s report on affordable housing. This includes increasing the supply of affordable housing and examining whether a shared equity scheme – like HomeBuy in England – could play a part in helping more FTBs onto the property ladder.”
According to Linda Will, managing director of Accord Mortgages, shared ownership is already an established part of the property market in the province. However, any attempt to implement a HomeBuy style scheme, which has only had limited success in England, would face many challenges.
She explained: “Something along those lines could work. The concept of shared ownership has been around for a long time but it is quite interesting that the one area of the UK where it has taken off is in Northern Ireland. However, for shared ownership to work, you have got to have enough builders wanting to work on it and enough lenders wishing to lend on shared ownership properties to keep the market going.”
One lender which is already playing a significant role in helping FTBs is the ‘Bank of Mum and Dad’, with Sives noting most of his FTB clients have parental backing.
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“I’ve seen quite a lot of downsizing going on recently, with cases where children are on the verge of moving out and parents are sitting in large houses. If they feel downsizing is a way to help their kids onto the ladder then they may take it. But generally, a lot of parents are helping out and most of the people who come to me would be nowhere near the market if mum and dad weren’t financially in the background.”
But this market situation cannot continue for much longer, with Sives admitting that even buy-to-let investors cannot make Northern Irish property work for them. 54 per cent annual growth is, after all, unsustainable in a nation where income multiples would currently see them needing 10 times the average salary just to afford a property.
Help on the horizon
However, according to the Bank of Ireland, help may be on the horizon, with price inflation in some areas already being reined in. Alan Birdle, head of research in Northern Ireland at Bank of Ireland, believes:
“We are living through remarkable times in Northern Ireland. However in time, the first quarter of 2007 may prove to be the high watermark as far as Northern Ireland’s rate of residential inflation is concerned. Since Easter, close observation of the housing market would suggest that at long last, the local price boom may be starting to come off the boil with a return to a more normal market.”
Has this slowdown come too late for the province though? With some analysts, including Joe Frey, head of research at the Northern Ireland Housing Executive, pointing to an increased move away from buying towards living in rental accommodation, has the boom changed the dynamics of the marketplace irreversibly? Without a sustained period of little or negative inflation growth, wages will not have a chance to catch up. Even if the boom is slowing, the challenge to get onto the property ladder is by no means over for the people of Northern Ireland.
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