RICS Northern Ireland Housing Conference - 28 January 2010

Good morning ladies and gentlemen.  Thank you for your kind invitation to speak to you today and for the opportunity to talk to you about the changes to the global and UK economies and how this has impacted on the Northern Ireland Housing market.

The cataclysmic events in the world economy over the past few years have been well documented and as you all know the sub-prime crisis and the ensuing credit crunch have led to economic recessions in all the major industrial countries, with disastrous effects for housing markets.

Our economy has been no exception to this and there has been an estimated 4.5% contraction in the North’s economic growth in 2009. We have also suffered the steepest fall in employment of any UK region and it will be a long time before we return to 2007 levels of employment and output.

The last two years have been a fairly torrid time for the housing market in Northern Ireland. House prices that had been rising sharply since 2000 came to an abrupt halt in 2007 and we are now suffering as much as or more severely than any other UK region in terms of negative equity and mortgage repossession.

Before 2007, there were predictions of a crash, but nobody wanted to believe it would really happen. With the added benefit of hindsight however, it is clear that the rocketing prices and decreasing affordability of the time were unsustainable in the long term and a correction was unavoidable.

The heady atmosphere of the North’s first housing boom has now been replaced by the sobering realisation that we have entered our first period of bust.

And the whole housing market has subsequently been transformed. What was once a seller’s market has now become a buyer’s market – policies that seemed essential a year ago now seem dated, and we must get to grips with the new challenges that have arisen.  

Affordability is now much less of an issue but, ironically, borrowing has become much harder. This makes it difficult for first time buyers to enter the market and restricts the ability of those on the lower rungs of the ladder to trade up.

There is also evidence that existing homeowners are proving reluctant to accept the fact that their homes have dropped in value and are still setting unrealistic asking prices for their homes, which in turn makes buyers much less likely to enter the market.

Crucially, the uncertainty around prices and values, allied to the difficulties in accessing mortgage finance, has led to unusually low levels of activity in the market. And the number of transactions during the third quarter of 2009 was only one third of what would be expected under normal market conditions.

However, it’s not all doom and gloom.  

According to the University of Ulster’s latest Quarterly House Price Index there are now some positive signs that the downward price correction may have run its course and that the market could be entering a period of relative stability. In fact the correction was probably necessary to keep houses at an affordable level and allow a healthier housing market to re-emerge.

In spite of this and in spite of the growing sense of some small level of recovery in the wider economy, we are almost certainly entering a period of lower public spending. The Northern Ireland Executive will be under pressure to make cuts and it is vital that we do not allow this process to prevent us from finding suitable homes for those in serious housing need.

In recessions, it is invariably those who can afford to lose the least who end up losing the most. Unexpected, sudden unemployment can result in people being unable to pay their rent, mortgage or loan payments. Through no fault of their own, these people are forced to turn to government for help with their finances and their housing situation.   

That is why we need to look at innovative solutions to help people most in need.  But these must also include the Private Rented sector in Northern Ireland which is a vital part of the Northern Ireland Housing Market and makes a very significant contribution to meeting housing need for a diverse range of households across many locations. It is though, often overlooked despite its importance in ensuring a vibrant, healthy property market.  

Despite sound financial management and innovation the financial outlook for housing does remain extremely difficult. Because of the reliance on the realisation of house and land sales it is virtually impossible to effectively develop a housing investment strategy.  It is therefore essential to break the link between the level of investment in social housing and the level of capital receipts realised.  Only by providing a definitive budget allocation for social housing can I put in place effective and efficient plans to address housing need.

And improving housing affordability is a critical priority for my Department and the Programme for Government, which outlines a commitment to improve the affordability and supply of housing in all communities, including rural areas, to meet both current and future need. We continue to provide historically high levels of support to Co-Ownership because of the recent changes to lending habits mean that getting on to the homeownership ladder remains difficult for many. Whatever the constraints on the public purse, we must ensure that we continue to explore other methods of providing assistance to provide the necessary help and support to those in need.  

That is why I firmly believe that the implementation of the New Housing Agenda will ensure a healthy and sustainable market in the future. More social houses are being built now with existing resources than previously would have happened. The New Housing Agenda will deliver more social, more affordable, more energy efficient and more sustainable homes.

Thank you once again for inviting me to address your Conference and best wishes for the remainder of the afternoon.