2018: The year of the dog and the backstop…

2018 was the Chinese year of the dog, but in this part of the world, it will go down as the year of the backstop, when promises around the Irish border came back to bite Theresa May. Indeed, some have said that Brexit as a whole was the one instance when the canine caught the car and then didn’t know what to do with it.

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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.

Chief Economist’s Weekly Brief – Jobs boom but wages disappoint

Smile. Unemployment is 4% in the UK. Last seen when Derby County won the league, Harold Wilson was PM and ‘Make me smile (come up and see me)’ topped the charts. We’re practically German (3.4%). Employment rose 42k in Q2, full time jobs up 105k (so a fall in part time). True, the money’s not great. Average pay growth slipped to 2.4%y/y in June, barely above the preferred measure of inflation (2.3%).  We’re treading water. Otherwise, it’s hard to fault the figures. Jobs are more secure and ¾ of the increase in jobs are high skilled.  Many may be on holiday. But the labour market certainly isn’t.

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Time to promote a ‘property-renting democracy’

 There’s no shortage of information on the housing market, telling us how prices and sales activity for instance are changing on an annual, quarterly or even monthly basis. These surveys are important and give us a flavour of how the market, which is a key part of the economy, is performing. But there is a danger that we get too fixated on these numbers and miss a more important trend.

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