NIFHA Economic context, the housing sector and the outlook - Economist: Jordan Buchanan Ulster University Economic Policy Centre
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
NIFHA
Economic context, the
housing sector and the
outlook
Economist: Jordan Buchanan
Ulster University Economic Policy Centre
@UlsterUniEPC
Agenda
• Recent economic performance
• The housing sector
• The economic outlook
• Final thoughts
@UlsterUniEPC
Recent economic performance
Context in economic growth striking
Buoyant jobs market, weak output market
Explaining the post crash
recovery:
• Jobs rich recovery, both UK
and NI
• Much weaker output
recovery (GDP/GVA)
• Productivity growth has
stalled
• Creating jobs in lower
productivity sectors, losing
jobs in higher productivity
sectors
• Since 2009, full time
workers wages are down
5% in real terms!
@UlsterUniEPC
Boom & bust & return to normality?
@UlsterUniEPC
Source: LPS, UUEPC analysis
Housing sector
Value in the market?
Note: London house prices haven’t appreciated since
Brexit vote- but this is not a bad outcome!!
@UlsterUniEPC
Source: LPS, UUEPC analysis
Affordability a key selling point for NI
First Time Buyer:
Northern Ireland:
Average age of borrower: 30
Average price FTB home: £118k
Deposit: 15% (£18k) Loan size: £100,000
Loan income multiple: x3: i.e income: £33k
London:
Average age of borrower: 32
Average price FTB home: £313k
Deposit: 12% (£38k) Loan size: £275,000
Loan income multiple: x4: i.e income: £70k
Source: UK Finance Q2 2018
@UlsterUniEPC
Property type and tenure
13% rent from NIHE, 4% from Housing associations
Social renting demand: Key facts:
• Approx. 85k homes are rented from NIHE and
50k homes from other housing associations
• Last year there was 38,000 applicants on waiting
list- of which 24,000 in housing stress.
• 18,000 households presented as homeless-
biggest factors cited include: Accommodation
not reasonable, sharing breakdown/family
dispute and loss of rented accommodation
• Single males (33%) and families (32%) were the
biggest presenters of homelessness
• Average weekly rent is £75 in social sector vs.
£94 in private sector in NI
Source: NISRA, DfC, LPS, District Council Building Control via LPS, ONS, DCLG, CSO, DECLD & UUEPC analysis @UlsterUniEPC
Negative equity- A bigger concern for NI
% of mortgages in negative equity; June 2017
• A much bigger problem for NI residents
compared to other UK regions.
• 40% of buyers from 2005-2008 were in
negative equity in 2013.
• By mid 2016- no of total homeowners in
negative equity has fallen from 68,000 to
25,000 (equivalent to 10% of total
homeowners).
• Average negative equity balance is £32,000
• Continued growth in consumer credit,
anaemic wage growth, rising inflation,
gradual interest rate rises- NI more at risk
of difficulties in any UK wide economic
slowdown
@UlsterUniEPC
Source: UK Finance, CMLSource Property Pal, Rightmove
What real value looks like
(Sept 20th 2018)
What a £200k house looks like in different local cities
Belfast Manchester Edinburgh
Dublin London Cambridge
@UlsterUniEPCThe economic outlook:
Global themes
@UlsterUniEPCOutlook summary (all opinions matter)
Forecaster: 2018 2019 2020 2021
0.6% 0.4% 0.2% 0.4%
1.5% 1.0% 1.0%
0.9% 1.1% - -
0.8% 1.2% - -
1.1% 1.2% 1.3% 1.9%
Source:
UUEPC Autumn 18 Outlook
Ulster Bank (September 2018)
Dankse Bank/Oxford Economics Quarterly Sectoral Forecasts Q2 2018
EY Economic Eye Summer 2018
PwC Economic Outlook Summer 2018
1.0% 1.0% 0.8% 1.1% @UlsterUniEPCHouse price outlook
3-4% growth in coming years- but slowing thereafter
@UlsterUniEPC
Source: UUEPC Autumn Outlook 2018Final thoughts
‘Housing crisis’- different mechanisms
Is the market functional?- more than just a supply problem
• Supply- conventional explanation that UK doesn’t build enough homes (particularly in certain areas i.e
London/SE)
• Demand-Lack of demand in certain areas leaving empty/vacant homes
• Distributional- wealthy older people with spare rooms- building isn’t solution here- focus should be on
downsizing
• Quality- Areas with old towns and period properties left to decay over time. Acute in private rental sector-
encourage landlords to renovate
• Cost/crisis- Supply/demand isn’t driving prices- the amount of cash funnelled into the economy at low interest
rates is. Credit issue is driving the gap between homeowners/property shareholders and renters. Tenants of
social housing have lost out- in a functional market they could buy a home. An intergenerational problem of
wealth vs non wealth.
• Rising prices benefits downsizers, leaving wealth to next generation/ bank of mum and dad. People may also
use their housing equity as a ‘cash machine’ to buy a better car or build an extension- fuelling consumer
spending
Source: Ed Conway; Sky News, UUEPC analysis
@UlsterUniEPCIn summary – consumer behaviour key to watch
• The outlook is highly uncertain, all forecasts are conditional on the assumptions they are making about tariffs, migration
policy etc. The UUEPC forecasts already projected a slow down, though weaker post Brexit they do not suggest a recession
• Uncertainty only adds to worries of over dependence on consumers and on other NI weaknesses around inactivity and
productivity – there is much work to do under the new Programme for Government/ Industrial Strategy (assuming there is a
govt!)
• For NI the uncertainties of Brexit, whatever its long term impacts (which cannot be known at this point) will likely have some
property impacts
• Recent rises likely to be a combination of factors with pent-up demand and returning confidence / affordability dominating
• BUT- the inflation wage journey is the critical one to watch. Rising housing costs possible (mortgages, rates, fuel etc.).
• In macro terms weaning off consumer dependency is desirable it is still a tough transition
• In summary strong demand, but there are risks to plan for and mitigate
• NI’s labour market success over last 6 years is not to be ignored
@UlsterUniEPCThank You
Jordan Buchanan: Economist
Ulster University Economic Policy Centre
Email: j.buchanan@ulster.ac.uk
Twitter: @jbuchanan0707
LinkedIn: Jordan Buchanan
Telephone: 02890 368 362
@UlsterUniEPCYou can also read
