Belfast Telegraph

Sunday 29 May 2016

Negative equity holds back full housing market recovery in Northern Ireland

By Margaret Canning

Published 25/02/2016

A typical UK first-time buyer paid 8% more for a home in February than a year earlier, at £214,000.
A typical UK first-time buyer paid 8% more for a home in February than a year earlier, at £214,000.

Full recovery in the housing market in Northern Ireland is still being held back by negative equity, according to the latest mortgage figures.

There were 3,700 loans to homebuyers in the last quarter of 2015, up 6% on the third quarter and 3% on same period a year earlier, the Council of Mortgage Lenders (CML) said. 

Loans were worth £380m, up 3% quarter-on-quarter and on the same period in 2014.

First-time buyers in Northern Ireland took out 2,100 mortgages worth £190m during October to December last year.

That was up 5% by volume and 12% by value compared to the same time a year earlier.

But there was no year-on-year growth among home-movers either climbing the ladder or downsizing.

While there was a 7% quarter-on-quarter growth in loan numbers to 1,600, there was no change in loans to home-movers year-on-year, the CML said.

The figures emerged as the Ulster University quarterly house price index found there had been 9% year-on-year growth in average house prices here to£154,685.

Ulster Bank chief economist Richard Ramsey said the CML survey presented "a tale of two markets" with movers held back because their homes were worth less than they had paid for them.

"Northern Ireland's first-time buyer market has experienced a much stronger recovery than the home-mover market," Mr Ramsey added.

"The latter's recovery has been thwarted by the legacy of negative equity.

"Ten years ago, the first-time buyers' share of the Northern Ireland mortgage market was just 36%. Last year, it stood at 56%.

"Northern Ireland and London are the only two regions in the UK to have a greater proportion of first-time buyers than home-movers.

"For Northern Ireland, this isn't so much a sign of a healthy first-time buyer market but an unhealthy home-mover market, with abnormally low levels of activity."

Economist John Simpson said 2015 had seen a boost in activity in general but agreed that negative equity could still pose problems.

"Possibly as a consequence of the continuing hangover of negative equity, the marketplace for households moving upmarket is still restrained and is well below the unsustainable levels reached in 2008," he added.

The Northern Ireland-based Progressive Building Society reported that it had seen a 20% annual increase in the value of its first-time buyer loans.

That was more than the 12% growth in value found by the CML, the society said.

Chief executive Darina Armstrong added: "Our qualified mortgage advisors are observing an upward trend in the home-movers sector, which, coupled with the steady influx of approved mortgages for first-time buyers, is a very positive sign for the housing market here."

And Niall Harkin, head of mortgage intermediary business at Danske Bank, said the survey was "very positive". "The level of mortgage activity is very healthy and it is encouraging that both the number of mortgages and the value of those sales were higher in the fourth quarter of 2015 than in the same three months of 2014," Mr Harkin added.

He also said that it was surprising there had been no year-on-year growth in home-mover mortgages but admitted that, with interest rates likely to remain low, that could change this year.

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