Bank of Mum & Dad funding housing market recovery

The latest set of mortgage statistics from UK Finance reveal further signs of buoyancy in the Northern Ireland housing market.

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The first-time buyer market continues to post double-digit growth year-on-year. 2,700 new home-owners took out a mortgage in Q2 2018, that’s up 12.5% y/y and the highest figure since Q4 2005. Meanwhile the size of the loan advanced to new home-purchasers hit £100,000 for the first time. 

Significant deposits remain a feature of the mortgage market for first-time buyers. The median deposit for both NI & UK first-time buyers currently stands at £17,000.  That equates to three-quarters of the median annual salary of a full-time Northern Ireland employee aged 25-34 years of age. Few thirty year olds (the average age of a first-time buyer) can avail of this sort of cash without assistance from the so-called Bank of Mum & Dad / Bank of Grandmum & Grandad.

Unlike the first-time buyer market, growth in the home mover market remains lacklustre. The legacy of negative equity and little or no equity continue to act as a drag on this area of the market.

Only 1,600 loans were advanced for people moving house in Northern Ireland during Q2 2018. This represented a rise of 7% y/y but compares with a quarterly average of 4,000 for the decade 1997-2006.

Remortgage activity, which accounts for one-third of mortgage activity, has also been on the rise. The number of loans remained flat at an eight-and-a-half year high of 2,300 in Q2 2018.  This represented a rise of 10% y/y but is still only one-third of the volume of remortgage activity that occurred between 2005-2008.

Overall, activity in Northern Ireland’s mortgage market continues to recover from the biggest property downturn in UK history. The first-time buyer market is driving this growth which in turn is being supported by individuals with access to sizeable deposits.

As far as deposits are concerned, the would-be first-time buyer market is being split into haves and have nots. For an increasing number of aspirational home-owners, saving for a deposit is particularly challenging within the context of ongoing house price growth, strong rent inflation, modest wage growth and rising utility bills.

Pricing Status? It’s complicated

To listen to consumers and the media, you would think that price is all that matters. Whether it’s house prices, holidays, the latest bargains, mobile phone contracts or even the price of a pint of beer, all people seem to focus on is the cost. And in many cases, price is indeed key. Think back to when chocolate bar companies shrunk their products rather than raise their prices, or how big a deal some retailers make out of their Boxing Day Sales and Black Friday deals. However, price isn’t always all that matters for consumers. Price, and what we’re prepared to pay, it turns out, is a complex thing.

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Time to promote a ‘property-renting democracy’

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Chart of the month: House prices – a tale of three cities

A graph charting instances of house prices being discussed at dinner parties across Belfast and Dublin would show a very large spike around 2007 followed by a deep trough in the years after the boom rediscovered gravity. Indeed, the subject became almost taboo as the downturn unfolded and residential property prices fell almost 60% from their respective peaks.

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Policy initiatives to be served up as housing market becomes political hot potato

A graph charting instances of house prices being discussed at dinner parties across Northern Ireland would show a very large spike around 2007 followed by a deep trough in the years after the boom rediscovered gravity. Indeed, the subject became almost taboo as the downturn unfolded.

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