Northern Ireland property prices drop

After months of achieving new records, Northern Ireland property prices have dropped and the Belfast Telegraph has been informed by industry sources that those who purchased a property a few months ago may have lost money in the current market, igniting fears of negative equity.

One estate agent based in Ulster remarked that one more interest rate rise could hammer property price growth down to nothing later this year.

The quiet summer period, rising interest rates and more new houses being released are thought to be responsible for house prices falling by up to 7%.

Many estate agents in Northern Ireland say the record-breaking house price growth noted in early 2007 has steadied. However, many believe that the market will recover after the summer slowdown.

McGranaghan Estate Agents in west Belfast estimated that there had been a reduction in house prices in some areas of 5-7%. The previous 12 months saw increases in the same areas of 40-50% over the previous 12 months. The agent declared that the slowness of the current market is as a result of interest rate rises.

The estate agent predicted that autumn should see renewed confidence in the market and growth of around 8% is anticipated by early 2008.

A spokesperson for Ulster Bank echoed the agent and said that the market is in a state of instability but added that it may be good news for first time buyers.

Goldsmiths Estate Agents in west Belfast commented that it is a buyers market now, the days of making a 50% profit are long gone. He added that some sellers are having to accept offers below the asking prices.

Possible housing crash in 2008

According to many property experts, the bubble could be about to burst on Britain’s booming property market. A crash could wipe at least £450billion off the value of the country’s housing stock. The results would be a flurry of bankruptcies and repossessions.

According to research by the Bank of America, there is a one-in-five chance that the UK housing market will experience a severe crash in the next 12 months. The Bank states that property prices are currently overvalued by at least 20%.

Bovis Homes and Barratt Developments, the housebuilders, have recently indicated that the 5 consecutive interest rate increases have resulted in slowing growth in the property market.

In addition, record levels of mortgage and unsecured debt and buy-to-let enthusiasts are making the market even more unpredictable. Many hold the Gordon Brown responsible for forcing homeowners with higher taxes and his unwillingness to increase stamp duty thresholds in line with house price inflation.

Financial institutions and analysts believe that current economic circumstances are indicating a crash.

Mortgage lending slumps 44% year-on-year

Figures released from the Council of Mortgage Lenders (CML) have revealed that mortgage lending in May was down 44% year-on-year.

Furthermore, homeowners opted not to re-mortgage due to soaring arrangement fees. Statistics showed that there were only 71,000 loans for re-mortgage in May this year, down 14% from the previous month.

In 2003, the average arrangement fee was around £299, however since the UK mortgage market has deteriorated, a typical arrangement fee can now be over £2,000.

While mortgage agreements increased by an insignificant 4% between April and May on an annual basis, the number nearly halved as home loan rates continued to increase, according to the CML.

First-time buyers have been hit badly by the mortgage freeze as a result of the credit crunch. The CML figures revealed that first-time buyer mortgages were down 41% from May 2007 to May 2008.

It seems that borrowers are looking for security in the current economic climate as the most popular mortgage is the fixed-rate, making up for 66% of all mortgages in May.

Michael Coogan of the CML explained that lending levels continue to be lower than last year and any recovery is not expected in the short-term. There is little indication that the special liquidity scheme is increasing the flow of funds to the industry or lowering the cost of funds as was desired.

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London’s commercial property deals 50% down on last year

Commercial property transactions in the City of London and London’s West End in the first half of 2008 have dropped by 50% in comparison to those carried out in the first half of 2007.

Figures from Cushman & Wakefield (C&W) indicate that the volume of investment transactions in the first half of this year fell to £4.9bn. During the first six months of 2007 transactions totalled £10.3bn.

As an illustration of the bleak state of the market in London, in the second quarter half of the turnover in the City of London came from the sale of just one building. Middle Eastern investors bought the Willis building from British Land for £400m in May.

A partner at C&W has predicted that yields will continue to rise and turnover will remain subdued as rental levels are beginning to come under pressure and the availability of finance is continuing to be restricted and expensive.

The market in the West End has been held up by retail property deals rather than offices, with transaction volumes falling from £1.4bn to £930m.

With the historical attractions of the West End being balanced against pressure on office rents, continuing shortage of debt and an economy faced with less disposable income, the outlook remains one of caution.

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