Belfast is a dynamic, thriving city and the hub of Northern Ireland. It has taken giant steps to reinvent itself from the turbulent days when tension between Protestant and Catholic communities was at its height, and although evidence of the troubles remains, mass regeneration of the city centre and surrounding commuter zones is underway.
Within the city perimeters, surrounding the areas of Shankhill and Falls Road, rows of burnt-out houses have been replaced with neat red-bricked terraced, semi-detached and detached family homes.
Historic buildings within the town centre have been restored to reveal the impressive architecture that lines cobbled streets within the Cathedral Quarter and the emerging Queen’s Quarter. The Belfast City Centre Management Company, a public and private partnership, has been responsible for the transformation, aiming to establish Belfast as a world class city.
Des Foley, an adviser at EM Financial, says: “As the province enjoys a sense of normality after more than 30 years of political and civil disruption, our housing market distinguishes us as different, certainly unlike our nearest neighbours in the Republic of Ireland and the UK mainland. We have a stable housing market that shows consistent growth and a level of normality in our society not seen since the early 1960s. We also have the youngest population in Europe, most of whom are very well educated and skilled, and one of the highest home ownership ratios in the world.”
A growing city
Jim Wylie, divisional sales manager at The Mortgage Business, agrees: “Belfast is certainly a growing city with significant inward investment. There is a new shopping complex being built in the city centre and the old gas works has been redeveloped with large companies taking office space including a call centre for Halifax. There is also a lot of redevelopment along the waterfront and there is excellent transport links to the rest of the province.”
The Northern Ireland economy is today unrecognisable from the 1980s and 1990s. But it remains an economy in transition, and some might argue it is de-industrialising itself, as new retail outlets, warehouses and apartments opened in place of older factories. It is also experiencing record employment levels, with more than 57,000 jobs created during the last five years across the country.
This has been fuelled in part by a booming tourism industry in Belfast. Weekend breaks are becoming an attractive option for visitors from the mainland, with more than five million tourists touching down in the capital city this year, spending an estimated £79.4m. This is a 47% increase over 2002 and reflects the city’s growing maturity as a visitor destination. Tourism has also been behind the regeneration of central Belfast, including the river Lagan, where visitor attractions, bars, restaurants and apartments line its shores.
However, around 70% of the workforce has an income of less than £20,000 per annum, while 25% of the workforce earn less than £10,000 a year, meaning that the average income per head remains 20% below UK levels.
Despite this, a strong economy has helped boost the Belfast housing market, with vast improvements made in housing conditions since 1996, says Joe Fry, research manager at the Housing Executive in Belfast. Fry says: “Over the past 12 months Northern Ireland’s housing market has remained buoyant. House prices have risen, but at a sustainable level.”
However, Fry says there are increasing signs of strain within the owner-occupied sector where affordability is becoming a more important issue for first-time buyers, particularly those trying to find a property within commuting distance of Belfast. In the social sector there is also increasing pressures with smaller numbers of new social dwellings being built. Fry adds: “There is a shortage of affordable housing in certain areas of the city with waiting lists rising steeply. The reason for this is high land prices in Belfast and the Housing Executive being outbid by developers for low-cost properties.”
Clearly defined areas
Housing in Belfast consists of a mix of terraced, semi-detached and detached housing. There are clearly defined wealthy and less well off areas of Belfast, as well as ongoing segregation between Catholic and Protestant communities.
Alan Bridle, senior manager for research services at Bank of Ireland (BOI), divides Belfast into four parliamentary constituencies of North, East, South and West. Areas that have seen the greatest growth include South Belfast. Bridle says: “South Belfast is seeing a mini property boom. Five years ago nobody would have touched this area – they were giving the properties away – but investors have now realised its true potential due to its close proximity to the university, hospital and the city centre, which can be reached by foot in 20 minutes.”
However, there has been tension between local residents and South-East Asian communities, and incidents where families have been driven from their homes, he adds.
East Belfast is traditionally the industrial area of the city and is close to the centre. Most houses within this area are older terraced housing, nestled among the now defunct factories and the famous shipyard that built the cruise liner Titanic. This area, which used to be the hub of the city and home to more than 50,000 employees, is now quite deprived.
In contrast, West Belfast is bursting at the seams. It has seen high population growth due to a historically high birth rate. Elsewhere, in North Belfast, evidence of the troubles can still be seen, and the Peace Wall dividing the two communities dominates the skyline.
Richard Sexton, national business development manager at Esurv Chartered Surveyors, believes that property prices remain affordable in Belfast. Sexton says: “Belfast property values have had so much ground to make up, there has been plenty of room for the staggering growth witnessed in the 1990s. This was partly attributable to the peace agreement. This effect will not last forever and ultimately we would expect to see prices normalise and be driven in line with the factors that affect the market on the mainland.”
Statistics from BOI reveal that the average price in Belfast has increased by 11.4% to £112,077. In terms of property type all sectors of the market, with the exception of apartments, have seen significant increases in prices, with terraced houses increasing by 14.2% to £90,261 and semi-detached houses increasing by 20% to £127,301. Detached house prices also climbed by 6.8% for the year to £184,125, while the apartment sector saw its average price drop by 3.4% to £90,825.
Within the commuter zone of Belfast, rates of price growth have continued to increase, though a more variable picture is now apparent. For North Down the annual rate of increase remains low at 2.7%, whereas in Lisburn, house prices have increased on average by 17% and in East Antrim by 6%. For all three markets, significant rates of price increases have occurred over the second quarter of 2004. The average price in North Down is £118,601. The best performing sectors have been semi-detached houses fetching £104,532, semi-detached bungalows with £98,658 and terraced houses achieving prices of around £88,192.
In Lisburn, the overall average price sits at around £130,591, making this area the highest priced for the province. There have been significant increases on all types of properties, with the exception of detached houses, which sell for an average of £171,329, compared to a detached bungalow, which can fetch around £192,438.
For the East Antrim market the overall average price has increased by 5.6% to £95,704 over the year, and 4.5% in the last quarter. Terraced houses have seen the greatest rate of growth fetching a sale price of £67,176, up by 19.1% over the year, and detached bungalows with a sale price of £135,554, up by 14.6%.
Sexton says: “Property hotspots are being created by over demand on the fringes of Belfast’s traditionally expensive areas and this is also the case within towns commutable to Belfast in Counties Down and Antrim.” But he believes with improvements to infrastructure and the newly constructed Toome bypass on the arterial route between Belfast and Londonderry, property beyond the typical commuter belt is also set to rise.
Long-term investments
With property prices still considered relatively low by mainland UK standards, where the average property price now stands at £152,159 – according to the latest Nationwide house price index – property still remains a good investment for buy-to-let (BTL) enthusiasts.
Bridle believes that although the market has begun to level off, there is still money to be made for long-term investors, adding: “Investors realise that there is still a market for buy-to-let considering the trends in the first-time buyer market, coupled with a rising population and a massive increase in student numbers, but not at the levels seen in the past.”
The residents of Northern Ireland, and Belfast in particular, have always enjoyed a healthy relationship with intermediaries which, according to market analysts Mori, account for 50% of all mortgage business submitted to lenders. And Noel Anderson, an adviser at Indigo Mortgages, says he has never been busier helping his 20-strong client base juggle sizeable portfolios of property.
He says: “I have seen a greater drive in buy to let at the moment than at anytime in my 25-year history, and the consensus from this firm is that BTL has never been stronger.” He adds the bigger players in the BTL market in Northern Ireland include BM Solutions, Mortgage Express, Mortgage Trust, Capital Home Loans, Chelsea Building Society and Abbey.
Wylie adds: “There has been a very buoyant buy-to-let market but it has since slowed as rental incomes struggle to keep up with the recent rate rises. The most popular buy-to-let properties are terraced houses and flats as semi-detached homes seem to be priced out at present.”
Competition from buy-to-let investors from the mainland and the Republic of Ireland has also made it difficult for first-time buyers to secure a property, says Anderson. “It has become much more difficult for first-time buyers over the past two years due to rising house prices, and I feel this is the primary driver for buy-to-let, as many would-be purchasers are forced to wait much longer before acquiring a property.”
But Anderson believes lenders have been slow to offer solutions to first-time buyers, adding: “Lenders are offering the same income multiples today compared to when I first started 25 years ago, and this has not changed significantly despite the fact that interest rates have fluctuated to a low of 3.5% and a high of 15%. Affordability formulas do not offer a significant increase to income multiples either.” As a result, many first-time buyers are turning to co-ownership schemes, which has seen the number of buyers opting for this scheme increase, says Andserson.
Behind the initiative is the Northern Ireland Co-ownership Housing Association. Established in 1978, it enables households on lower incomes or without sufficient savings to make the necessary deposit to make the first important step onto the property ladder.
Alan Crowe, chief executive of the association, says: “Getting the cash together for a deposit is a common problem for many first-time buyers, or getting a large enough mortgage. Co-ownership can overcome both. We are not just another alternative in the mortgage market, as co-ownership is not about competing with high street mortgage lenders. We are a Government-funded service, working with mortgage lenders to provide an affordable package for people who otherwise would be priced out of the housing market.”
Lender reluctance
However, in spite of innovations in the shared equity market and a booming buy-to-let market, advisers have been quick to criticise lenders’ reluctance to move into Northern Ireland.
Foley believes homeowners in Northern Ireland have been unfairly penalised and cannot understand the logic behind this. He says: “House prices over the last 20 years have grown at an average rate of 6.4% and, unlike most of the UK, Northern Ireland did not go through a boom-and-bust period in the late 1980s and early 1990s. Negative equity is not a term used in the provinces and mortgage arrears and repossession levels are among the lowest in the UK, so in theory it would appear to be a lender’s dream.”
He adds: “We hear all kinds of reasons why lenders do not offer products in Northern Ireland, including land registry delays, implications for securitisation and possible civil strife. Almost as frustrating are the special terms under which some lenders trade here.
Until the mid-1990s, Belfast’s relatively low house prices made it one of the most affordable regions in the UK but, with the onset of greater political stability and economic growth, substantial house price increases have been seen.
This, in turn, has made it difficult for first-time buyers struggling to keep up with an active property market, while competing with wealthy buy-to-let investors from outside the country. Lack of product choice from both mainstream and sub-prime lenders has also further hindered the cause. However, it would appear business is booming for intermediaries, which to this date enjoy a 50% stake in the mortgage market.
