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 How do we stimulate the market? Key issues for discussion

Drivers of Housing Demand SUPPLY FINANCE CONFIDENCE / ECONOMY

CHALLENGES Affordability 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) Source: University of Ulster House Price Index

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

SOURCING FINANCE Income 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

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 FINANCE Income 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 FINANCE Income 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? CHALLENGES New Homes market

Transaction Trends Qtr 12,0372,1662, Qtr 22,4612,2852,2061,044 Qtr 32,7722,2911, Qtr 42,4782,5071, TOTAL9,7489,2497,4753,314 Overall Annual % Change -5.1%- 19.2% % Source: University of Ulster House Price Index

Transaction Trends Source: University of Ulster House Price Index

New Home Sales vs. Resale Stock Sales Q – Q (percentage of total sales) Source: Straw poll results from 3 top sales agents in NI

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

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

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

NHBC New Build Registrations /Finals (Completions) 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)

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