NI housing market update - December 2013

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A PowerPoint Chart Pack covering all aspects of the Northern Ireland Housing Market. It covers house prices, mortgage activity, housing starts and completions, affordability etc. Comparisons are …

A PowerPoint Chart Pack covering all aspects of the Northern Ireland Housing Market. It covers house prices, mortgage activity, housing starts and completions, affordability etc. Comparisons are made with the UK, Republic of Ireland and UK regions.

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  • Important thing is NI cannot insulate itself from global economic events
  • Important thing is NI cannot insulate itself from global economic events
  • Important thing is NI cannot insulate itself from global economic events
  • Important thing is NI cannot insulate itself from global economic events

Transcript

  • 1. Northern Ireland Housing Market Update Issued 13 December 2013 Richard Ramsey Chief Economist Northern Ireland richard.ramsey@ulsterbankcm.com Twitter @UB_Economics Slide 1
  • 2. Contents Slide Numbers 1. Housing Market Summary 3-6 2. House Price Performance 7-20 3. UK & NI Regional House Price Performance 21-32 4. Mortgage Activity & Residential Property Transactions 33-63 - Negative equity, consumer stress, student debt & labour market conditions 5. Housing Starts & Completions 64-82 6. Housing Affordability & Interest Rates 83-101 7. Demographic Trends & Projections 102-105 Slide 2
  • 3. Northern Ireland Housing Market Summary Slide 3
  • 4. Summary of Pre & Post boom housing market conditions Jan 2005 £ 285,000 250,000 215,000 Q3 / Q4 2013 Unemployment 29,000 & falling Net inward migration rising New investors & lenders entering the market Credit availability increasing NI house price 69% of UK average NI lowest house prices bar Scotland 95% LTVs freely available & 75% LTV 5yr fix 5.2% Average UK SVR 6.6% Expectations prices would rise Economic confidence high & rising Auctions not a major feature of property market Equity withdrawal increasingly popular Household formation age-group (25-34) rising Unemployment 61,000 (Oct) & falling Net outward migration continuing Credit conditions not what they were Fewer lenders NI house price 52% of UK average NI lowest average house prices in UK 95% LTV's returning Average UK 75% LTV 5yr fix is 3.37% (Oct-13) Average UK SVR 4.36% (Oct-13) Economic confidence low & job insecurity high Expectations prices have stabilised and may rise Distressed sales at auctions Negative equity widespread, equity withdrawal more limited Inflationary pressures (food & energy) impacting upon affordability Private rental sector more popular Household formation age-group (25-34) peaking 180,000 Key issues going forward 145,000 110,000 BoE to raise Bank Rate eventually Public expenditure cuts, tax rises & benefit cuts (e.g. housing benefit) Lack of employment opportunities for younger generation & tomorrow's FTBs FTBs increasingly have student debt / tuition fees Debt repayment / repossessions when interest rate only mortgages expire Outworking of NAMA & corporate / household de-leveraging Undersupply of housing and lack of funding for sector Scale of competition within banking - new products? Planning changes? House-building per capita at a lower rate than in 1960 - longer term implications? 75,000 Jan-05 Apr-06 Jul-07 Oct-08 Jan-10 Apr-11 Jul-12 Oct-13 Slide 4
  • 5. NI Housing Market Summary (1) Residential property prices posted their 2nd successive quarterly rise of 2% q/q in Q3 2013 according to DFP’s Residential Property Price Index. Q3 2013 also represented the first quarter in almost 6 years (Q4 2007) that NI residential property prices have posted year-on-year increases. The median residential property prices are now 54% below their peak. According to DFP’s NI Residential Property Price Index, transactions increased by 7% q/q in Q3 2013 and were 12% higher than the corresponding quarter in 2012. The RPPI uses data from the HMRC and includes mortgages and sales through auctions. There were 14,919 property transactions in NI in over the year to Q3 2013. This represents a 15% rise on the previous 4 quarter period and is 59% above the low in Q2 2009. The total level of NI property transactions in the 4 quarters to Q3 2013 was 64% below the Q1 2007 peak (41,442). The value of NI’s residential property transactions has fallen by £5.7bn (80%) since the Q1 2007 peak. The steep fall in property transactions has seen activity within the Business Services & Finance sector fall (as of Q2 2013) by 51% since Q4 2006. The equivalent sector in the UK is just 0.3% below its pre-downturn peak. According to the Council of Mortgage Lenders (CML), NI mortgage activity increased by 22% q/q and 22% y/y in Q3 2013. Over the last 4 quarters to Q3 2013, there were 9,500 mortgages in NI. This compares with 27,000 in 2006. As a result, mortgage activity in NI is running at 35% of 2006 levels and 73% below the peak in 2003 (35,100). The incidence of negative equity has been growing in NI but falling in most other UK regions. According to the CML, 35% of mortgages taken out since 2005 in NI were in negative equity in October 2012. This was 3.5 times the corresponding rate for the UK (10%). Other studies estimate 20-25% of all NI mortgage holders are in negative equity. This is more than any other UK region and compares with 10.5% of UK mortgage holders in the mid-1990s. According to the NHBC, the sale of new houses hit a series low in Q2 2013. New house sales over the year to Q2 2013 were 84% below 2006 levels. Slide 5
  • 6. NI Housing Market Summary (2) The NI FTB mortgage market is expected to hit a 6-yr high in mortgage completions for 2013. Nevertheless, FTB mortgage activity over the year to Q3 2013 remains 37% below 2006 levels. This is broadly in line with the UK (-40%). The FTB segment accounted for 59% of the mortgage market (UK=449%) over the year to Q3 2013 – its highest share since 2001. Meanwhile there has been virtually no recovery in NI’s ‘home mover’ market. Mortgage completions within NI’s ‘home mover’ market over the year to Q3 2013 were 78% below 2006 levels. This represents the lowest number of mortgage completions since 1974. By comparison, the UK ‘home mover’ market is 54% below its 2006 levels. NI’s remortgage market has plummeted over the last six years. During the year to Q3 2007, there were 32,900 remortgages in Northern Ireland. Over the year to Q3 2013, there were 28,200 fewer (or -86%) remortgages. In 2011 there were just 6,977 house completions – the lowest outturn since 1994. The corresponding figure for 2012 was 7,920. A second consecutive annual increase is estimated for 2013 with around 8,700 units. This is 52% below the 2006 peak of 18,000 units. House completions in the UK and the RoI are 40% and 91% below their respective pre-crisis peaks. NI is currently building fewer houses per capita than it was in 1960. At its peak (2006), NI was building 10.3 housing units per 1,000 population. 2013’s estimate is 4.7 per 1,000 population which is still three times the rate in the Republic of Ireland (1.6) and twice the rate in the UK (2.2). Housing affordability has improved markedly for all house buyers. According to Nationwide, mortgage payments as a percentage of disposable incomes for first-time buyers is at a 15-year low. But disposable income after necessities (food & energy) is also important. Food, drink and energy inflation has increased by 42% between Q3 2007 and Q3 2013. Improving mortgage affordability is not all one-way traffic due to tax and benefits changes alongside inflationary pressures. Not least, food and energy inflation. The Bank of England’s ‘bank rate’ remains at its lowest level since 1694 and can only go up. The BoE is expected to keep rates on hold into 2015. Average interest rates on 5-yr fixed rate mortgages (75% LTV) recently hit a record low. NI’s household formation category (25-34 years of age) has almost peaked and is expected to fall over the next decade. Slide 6
  • 7. House Prices & Performance Slide 7
  • 8. Until May 2012 there were 5 house price surveys in NI… The Halifax House Price Index (Quarterly) The Halifax produces a UK wide House Price Index based on their own mortgage approvals. A regional index for Northern Ireland is also produced on a quarterly basis. www.lloydsbankinggroup.com/media1/economic_insight/halifax_house_price_index_page.asp The Nationwide House Price Index (Quarterly) The Nationwide produces a UK wide House Price index based on their own mortgage approvals. A regional index is produced for Northern Ireland on a quarterly basis. Indices and average prices for the UK and regions are produced using a updated mix-adjusted House Price methodology. Like the Halifax and NI RPPI this allows ‘typical’ property to be priced over time on a like-for-like basis. www.nationwide.co.uk/hpi Bank of Ireland / Northern Ireland Housing Executive / University of Ulster Quarterly House Price Index The Northern Ireland Quarterly House Price Index is produced by the BoI, NIHE & UU. The market evidence is sourced using a sample of estate agents across Northern Ireland. The price statistics are simple arithmetic averages. The index is weighted to reflect the market share of each property type (e.g. terraced, semi-detached, apartment etc) www.bankofireland.co.uk/bank-of-ireland-group/financial-news/boi-house-price-index/ Office for National Statistics UK House Price Index (Monthly) The ONS House Price Index (HPI), previously published by the Department for Communities and Local Government (DCLG), is a monthly release that publishes figures for mix-adjusted average house price indices for the UK and its regions. The index is calculated using mortgage financed transactions that are collected via the Regulated Mortgage Survey by the Council of Mortgage Lenders. These cover the majority of mortgage lenders in the UK. http://www.ons.gov.uk/ons/rel/hpi/house-price-index/october-2012/stb-october-2012.html RICS Housing Market Survey, Northern Ireland (Monthly) The Royal Institution of Chartered Surveyors (RICS) & Ulster Bank Housing Market Survey. Uses a house price balance r diffusion index. The balance = the proportion of surveyors reporting a rise in price minus those reporting a fall. Slide 8
  • 9. But an important 6th survey has been added: NI’s Residential Property Price Index (RPPI) RPPI Background Until  May  2012,  there  were  5  surveys  that  provided  slightly  different  views  on  either  the  average  house  price  or  the  direction  of  house  prices.    On  the  23rd  May  the  Department  of  Finance  &  Personnel  (DFP)  added a 6th survey. The  latest  addition  has  a  number  of  distinct  advantages over  the  existing  set  of  surveys  and  is  likely  to  become the one most closely followed.   The  new  Northern  Ireland  Residential  Property  Price  Index  (NI  RPPI), unlike  the  sample‐based  surveys,  includes  all  the  property  transactions  notified  to  Her  Majesty’s  Revenues  &  Customs  (HMRC) within  Northern  Ireland.  Therefore  it  includes  almost  the  complete  set  of  residential  property  transactions  from  cash sales (including auctions) to mortgages. The  NI  RPPI  includes  the  simple  average  and  median  (i.e.  the  price  below/above  which  half  of  properties  are  sold).  However,  both  of  these  measures  do  not  take  account  the  different  type  and  characteristics (e.g. size, location) of properties sold each quarter.  The NI RPPI addresses this issue using a preferred method that calculates a standardised price, which is a  hypothecated  value  based  on  a  weighted  combination  of  prices  (e.g.  0.5%  of  a  detached  house  in  North  Down,  4%  of  a  terraced  house  in  Belfast  etc).    This  method  provides  the  best  measure  of  an  index  reflecting pure price changes. Slide 9
  • 10. Latest Surveys: Summary House Price Performance NI & UK House Price Changes for All Property Types House Price Survey Quarterly Change   Q3 2013  Year‐on‐Year  Change Q3 2013  Change relative to  pre‐downturn peak    NI UK NI UK NI UK Nationwide 1.1% 2.2% 1.0% 4.3% ‐52.5% ‐7.9% Halifax ‐0.2% 2.0% ‐24.8% 6.2% ‐60.4% ‐14.7% DCLG DFP Residential Property Price Index University of Ulster / Bank of Ireland  ‐0.6% 2.5% 0.4% 3.6% ‐49.4% 0.9% 2.0% N.A 1.0% N.A ‐54.0% N.A 1.3% N.A ‐4.8% N.A ‐49.1% N.A The Halifax figures showing a 24.8% y/y decline in Q3 2013 looks to be at odds with all the other surveys Slide 10
  • 11. Latest Surveys Average House Prices Average House Prices ‐ All Property Types Q3 2013 Survey Survey Coverage Sample Size NI UK Mortgages Only Most Providers Low £130,000 Nationwide Mortgages Only Very Low £108,671 £246,000 18.0% £170,918 Halifax (mix‐adjusted average price)  Halifax Mortgages Only Very Low £90,951 £170,386 University of Ulster / Bank of Ireland DFP NI Residential Property Price Index (RPPI)  Mortgages & Cash Sales Low £129,777 ‐ Mortgages, Cash Sales & Auctions Very High  DCLG (mixed‐adjusted average price) Nationwide (mix‐adjusted average price) NI RPPI Mean (simple average) " £115,316 ‐ NI RPPI Median*  " £100,500 ‐ NI RPPI Standardised Price** " £98,612 ‐ * Median (i.e. the price below / above which half properties are sold)  removes the distortion on average from v.high / low prices ** Standardised Price is preferred method for measuring house price changes as it takes account the different type and characteristics (e.g. size, location) Slide 11
  • 12. NI surveyors have reported house price growth for 6 consecutive months % Balance Net balance of surveyors reporting a fall / rise in NI average house prices 100 75 Price Rises 50 67 Months 25 0 -25 -50 Price Falls -75 Source: RICS -100 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Slide 12
  • 13. Residential property prices have fallen 54% peak-totrough. Latest survey suggests prices have bottomed out NI Residential Property Price Index Index Q1 2005 = 100 Index (2005=100) 200 180 Prices now 54% below peak 160 140 120 100 Source: DFP RPPI 80 2005 Q3 2007 Q3 2009 Q3 2011 Q3 2013 Q3 Slide 13
  • 14. RoI house prices have been rising & now 48% below peak. Unlike NI RPPI, RoI’s CSO data does not include cash sales NI & RoI Residential Property Prices Quarterly Index Q1 2005 = 100 200 NI (RPPI) RoI NI ONS* 175 150 125 -49% below peak 100 -54% below peak 75 -48% below peak Source: DFP, CSO, ONS* includes mortgages only 50 2005 Q3 2007 Q3 2009 Q3 2011 Q3 2013 Q3 Slide 14
  • 15. In NI, terraced properties (-59%) have fallen the most from peak & Semi-Detached (-53%) the least Northern Ireland Residential Property Prices Index Q1 2005 = 100 225 Detached Semi-Detached Terraced Apartments 200 175 150 125 100 Q3 2013 Relative to Peak 75 Source: DFP RPPI Detached Semi-Detached Terraced Apartments -54% -53% -59% -57% 50 2005 Q3 2007 Q3 2009 Q3 2011 Q3 2013 Q3 Slide 15
  • 16. NI Residential Property Price Index by property type Northern Ireland Residential Property Price Index Index 2005 Q1 = 100 All Property Prices Detached Semi‐Detached Terraced Apartments 2005 Q1 2005 Q2 2005 Q3 2005 Q4 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 100 100 100 100 100 104 106 105 101 100 110 112 110 110 103 113 115 113 114 104 117 117 117 118 112 128 124 129 133 120 142 137 142 149 131 159 151 160 168 154 173 165 174 187 164 190 190 194 195 180 198 208 198 201 177 189 199 188 192 176 172 181 173 176 163 160 168 165 161 157 146 152 147 149 140 132 139 134 135 121 123 126 122 127 114 125 130 125 126 120 125 128 124 128 119 125 131 126 127 120 122 128 122 118 114 123 127 125 117 114 120 125 122 113 115 114 120 116 106 106 107 116 109 98 102 105 110 109 97 98 103 111 106 93 100 100 109 103 90 94 93 96 99 82 85 92 97 95 84 81 90 94 94 82 79 88 91 92 80 79 88 93 91 78 78 90 95 92 79 78 91 97 93 82 78 Q/Q Change Y/Y Change Fall from Peak 2% 1% 1% 3% 1% 1% 3% ‐1% 0% ‐1% ‐54% ‐54% ‐53% ‐59% ‐57% Source: DFP NI RPPI November 2013, Note % changes are calculated using unrounded figures Slide 16
  • 17. Standardised Residential Property Price & Index by NI Region Belfast Standardised Price 2005 Q1 2005 Q2 2005 Q3 2005 Q4 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 Belfast RPPI Outer Belfast Standardised Price Outer Belfast RPPI £104,003 £105,157 £114,360 £114,776 £117,336 £132,694 £148,334 £167,779 £178,508 £196,923 £207,252 £190,011 £171,040 £159,952 £150,062 £128,506 £121,157 £129,919 £133,120 £131,115 100 101 110 110 113 128 143 161 172 189 199 183 164 154 144 124 116 125 128 126 £114,980 £119,811 £125,622 £128,264 £130,833 £143,740 £160,533 £181,559 £199,326 £219,529 £230,610 £227,866 £203,268 £190,570 £166,243 £149,341 £137,320 £141,616 £142,832 £141,738 100 104 109 112 114 125 140 158 173 191 201 198 177 166 145 130 119 123 124 123 East of N.Ireland Standardised Price £106,397 £108,027 £113,994 £117,352 £121,886 £131,595 £146,126 £165,535 £186,351 £204,953 £214,788 £200,846 £186,905 £173,660 £157,575 £148,102 £135,413 £133,312 £134,815 £136,499 £125,067 £125,319 £122,164 £111,777 £105,647 £105,577 £104,826 £100,338 120 120 117 107 102 102 101 96 £140,301 £143,749 £142,040 £131,057 £126,151 £122,440 £121,580 £119,201 122 125 124 114 110 106 106 104 £93,474 £93,953 £93,050 £90,345 £87,283 £90,414 £93,042 90 90 89 87 84 87 89 £111,526 £111,205 £110,416 £107,410 £107,584 £108,284 £109,869 97 97 96 93 94 94 96 Q/Q Change Y/Y Change Fall from Peak 3% 0% ‐55% 1% 0% ‐52% West & South of N. Ireland West & South of Standardised N.Ireland RPPI Price £109,431 100 £118,383 108 £124,405 114 £130,874 120 £137,479 126 £147,251 135 £160,860 147 £179,770 164 £192,112 176 £210,131 192 £208,016 190 £199,899 183 £187,019 171 £167,304 153 £156,794 143 £143,240 131 £136,038 124 £139,776 128 £135,754 124 £137,082 125 100 102 107 110 115 124 137 156 175 193 202 189 176 163 148 139 127 125 127 128 North of N. Ireland Standardised Price £104,955 £110,841 £118,782 £123,087 £130,134 £139,108 £153,639 £166,938 £179,541 £196,055 £205,713 £199,752 £179,400 £171,354 £154,838 £142,290 £128,963 £125,542 £124,314 £129,493 £129,659 £131,373 £128,437 £122,871 £117,006 £112,857 £111,979 £107,039 122 123 121 115 110 106 105 101 £127,771 £127,532 £119,227 £122,132 £113,685 £108,049 £104,789 £102,873 122 122 114 116 108 103 100 98 £134,960 £132,305 £131,125 £124,628 £116,962 £112,089 £108,812 £105,858 123 121 120 114 107 102 99 97 £99,458 £99,178 £96,437 £94,262 £92,842 £94,693 £95,727 93 93 91 89 87 89 90 £95,624 £94,284 £89,995 £89,381 £89,715 £94,156 £94,241 91 90 86 85 85 90 90 £97,546 £94,088 £93,458 £89,193 £92,437 £92,838 £95,269 89 86 85 82 84 85 87 East of N.Ireland RPPI 1% ‐1% ‐55% North of Northern Ireland RPPI 100 106 113 117 124 133 146 159 171 187 196 190 171 163 148 136 123 120 118 123 0% 5% ‐54% 3% 2% ‐55% Source: DFP NI RPPI November 2013 Slide 17
  • 18. Residential Prices in Outer Belfast are the highest within Northern Ireland and now 52% below 2007 peak NI Residential Property Price Index & Standardised Price of Properties Sold in each NUTS3 Area Regional Area Belfast Outer Belfast East of N.Ireland North of N.Ireland West & South of N.Ireland Northern Ireland Source: DFP NI RPPI November 2013 Index % Change on % Change over Q3 2013 relative (Quarter 3 2013) Previous Quarter 12 months to Peak 89 96 90 90 87 91 3% 1% 1% 0% 3% 2% 0% 0% ‐1% 5% 2% 1% ‐55% ‐52% ‐55% ‐54% ‐55% ‐54% Standardised Price (Quarter 3 2013) £93,042 £109,869 £95,727 £94,241 £95,269 £98,612 Slide 18
  • 19. Median, Mean & Standardised Residential Property Prices Standardised NI Residential Property Price NI Average Sales Prices Q1 2005 ‐ Q3 2013 Quarter 2005 Q1 2005 Q2 2005 Q3 2005 Q4 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 Simple Mean Simple Median Standardised Price (RPPI) £116,293 £120,578 £128,901 £129,618 £133,152 £145,478 £164,159 £179,299 £198,072 £216,870 £234,135 £231,717 £212,124 £188,519 £175,782 £161,613 £146,401 £148,977 £149,475 £151,715 £100,000 £105,500 £115,000 £117,000 £120,000 £130,000 £145,000 £160,000 £175,000 £193,000 £200,000 £192,000 £175,000 £165,000 £152,000 £144,887 £130,000 £132,000 £135,000 £137,500 £108,232 £112,279 £119,173 £122,487 £126,844 £138,208 £153,370 £172,285 £187,603 £205,986 £214,477 £204,284 £186,469 £173,561 £157,767 £143,080 £132,654 £134,772 £135,018 £135,699 £148,220 £142,696 £141,080 £135,204 £127,315 £124,853 £126,082 £121,489 £124,000 £125,000 £125,000 £120,000 £112,000 £112,000 £111,500 £106,000 £132,013 £132,996 £129,887 £123,160 £116,194 £113,130 £111,301 £108,037 £115,648 £112,113 £115,995 £112,194 £110,234 £111,248 £115,316 £100,506 £98,000 £100,000 £96,000 £94,000 £95,000 £100,500 £100,483 £99,674 £97,708 £95,295 £94,951 £97,029 £98,612 Source: DFP NI RPPI November 2013 Quarter 2005 Q1 2005 Q2 2005 Q3 2005 Q4 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 Detached SemiDetached Terraced Apartment £161,290 £170,572 £181,064 £184,972 £189,255 £200,370 £221,391 £244,068 £265,663 £306,097 £335,812 £320,385 £292,330 £271,310 £245,225 £223,606 £203,759 £209,928 £206,486 £210,520 £104,899 £110,189 £115,112 £118,977 £122,910 £134,898 £149,205 £167,883 £182,988 £203,650 £208,014 £197,022 £181,197 £173,138 £154,094 £140,210 £127,922 £130,855 £130,432 £131,654 £80,119 £81,157 £88,230 £90,947 £94,749 £106,387 £119,211 £134,462 £150,051 £156,597 £160,908 £154,180 £141,195 £129,025 £119,365 £108,351 £102,031 £100,869 £102,870 £101,666 £98,729 £98,411 £101,414 £103,025 £110,729 £118,297 £128,940 £152,147 £161,794 £177,331 £174,611 £173,420 £161,241 £155,436 £138,056 £119,909 £112,422 £118,291 £117,050 £118,508 £205,648 £205,133 £200,839 £193,483 £186,836 £177,385 £179,511 £176,088 £127,745 £131,028 £127,507 £122,200 £114,618 £114,021 £110,813 £108,450 £94,899 £93,608 £90,546 £84,837 £78,572 £77,433 £74,545 £71,785 £112,095 £112,726 £113,911 £104,701 £100,628 £96,916 £98,356 £92,345 £104,180 £99,860 £99,041 £96,204 £95,430 £96,803 £97,887 £65,609 £67,649 £65,840 £64,242 £62,429 £63,389 £65,588 £84,347 £80,081 £78,233 £78,197 £76,676 £76,718 £77,125 £155,393 £156,103 £151,604 £147,025 £149,583 £154,016 £155,960 Source: DFP NI RPPI November 2013 Slide 19
  • 20. Strabane, Derry & Limavady Council Areas have the lowest median house prices depending on property type Median Sale Price of Residential Properties Sold between  October 2012 ‐September 2013 By Property Type & Location Local Government Detached Semi-Detached District £160,000  £105,000  Antrim £170,500  £103,750  Ards £124,875  £71,250  Armagh £135,000  £100,000  Ballymena £117,500  £73,500  Ballymoney £139,500  £90,000  Banbridge £225,000  £116,000  Belfast £147,500  £105,000  Carrickfergus £185,000  £125,000  Castlereagh £133,750  £95,000  Coleraine £130,000  £86,500  Cookstown £132,000  £80,000  Craigavon £147,250  £95,000  Derry £158,250  £95,000  Down £121,500  £88,500  Dungannon £124,750  £81,500  Fermanagh £134,950  £85,000  Larne £118,000  £69,500  Limavady £181,500  £112,000  Lisburn £132,000  £89,950  Magherafelt £137,500  £90,000  Moyle £144,200  £90,000  Newry & Mourne £154,375  £99,950  Newtownabbey £185,000  £109,225  North Down £124,950  £80,000  Omagh £108,000  £69,000  Strabane Source: DFP NI RPPI November 2013 Terrace Apartment Total £59,250  £65,000  £46,250  £63,950  £53,000  £61,000  £63,000  £57,000  £76,000  £69,000  £62,000  £49,000  £57,500  £70,000  £64,000  £58,000  £55,000  £47,500  £75,000  £64,000  £91,750  £59,000  £58,750  £85,500  £52,000  £50,750  N/A £52,000  N/A £89,950  N/A £66,000  £80,000  £67,000  £80,000  £120,000  N/A £62,625  £46,375  £80,564  N/A £67,500  £62,450  N/A £70,000  N/A N/A £60,850  £62,252  £80,000  N/A N/A £105,000  £102,000  £77,000  £105,000  £83,000  £93,000  £85,000  £95,000  £127,975  £115,000  £93,000  £75,500  £83,000  £112,000  £89,375  £90,000  £82,500  £83,625  £121,600  £103,500  £120,000  £95,000  £99,950  £120,000  £90,000  £78,000  Slide 20
  • 21. UK & NI Regional House Price Performance Slide 21
  • 22. According to DCLG survey average house prices are 49% below peak & UK prices are almost twice those of NI Average House Prices £ UK NI 250,000 £245k 225,000 200,000 93% 175,000 150,000 £127k 125,000 49% fall back to mid-2005 levels **Excludes Auction Sales** 100,000 Source: ONS 75,000 Sep-03 Sep-05 Sep-07 Sep-09 Sep-11 Sep-13 Slide 22
  • 23. Scotland was the only UK region not to post year-onyear growth in Q3 2013 Annual Average House Price Growth - Q3 2013 Y/Y Scot NE NI Wal NW YH East SW WM EM SE UK Lon -1.2% 0.4% 3.6% Source: DCLG -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% Slide 23
  • 24. NI experiences biggest peak-to-trough decline of all UK regions & has experienced the weakest recovery to date House Price Recovery - % Rise Relative to Trough Peak to Trough in UK Regional House Prices Q3 2013 As at Q3 2013 45% 0% Source: DCLG 40% -10% 35% -13.2% 30% -20% 25% -30% 20% 16.3% 15% -40% 10% -50% Source: DCLG -50.7% **Mortgages Only Excludes Cash & Auction Sales** 5% 2.6% 0% -60% Scot WM NW YH NE UK SE EM East SW Wal Lon NI Lon SE UK East SW Wal EM WM Scot NW YH NE Slide 24 NI
  • 25. The UK has recouped all of its house price falls but this is due to improvements within London & the South East House Prices Relative to Pre-Downturn Peak Q3 2013 30% 20% **Mortgages Only Excludes Cash & Auction Sales** 19.4% 10% 0.9% 0% -10% -20% -30% -40% -50% -49.4% Source: DCLG -60% Lon SE UK East SW WM Wal EM Scot NW YH NE NI Slide 25
  • 26. NI’s housing boom & bust followed a different trajectory to both the US & RoI….. Housing recoveries underway % Y/Y Annual House Price Inflation 65 US NI RoI 50 35 20 5 -10 -25 Source: DCLG & S&P / Case-Shiller 20-City House Price Index, ptsb/ESRI & CSO -40 Oct-03 Oct-05 Oct-07 Oct-09 Oct-11 Oct-13 Slide 26
  • 27. …..and a very different trajectory from the UK Annual Average House Price Growth Y/Y 60% 3 months / year 58.2% UK NI 45% 30% 15% +5.2% 0% -0.6% -15% Source: ONS -30% Sep-03 Sep-05 Sep-07 Sep-09 Sep-11 Sep-13 Slide 27
  • 28. …but then again NI bucked the national trend during the UK’s housing boom & bust of the 1980s & 1990s… UK's Boom & Bust of the 1980s & early 1990s House Price Index Index 2002 = 100 70 UK 65 60 55 NI UK house price peak in Q3 1989 50 Almost 8 years for UK house prices to return to 1989 levels 45 40 35 30 25 Source: DCLG 20 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Slide 28
  • 29. …the UK’s housing boom & bust of the 1980s & 1990s was mild relative to the NI variety of the noughties The UK's Housing Boom,Bust & Recovery (1980s & 1990s) Index Yr 0 = 100 versus the N.Ireland Experience 350 300 250 Q3 1999 5 years prior to house price peaks (UK starts at Q3 1984 & NI Q3 2002) Q3 1995 UK house prices 32.5% above peak in 10yrs & 193% rise in 15yrs UK average house prices 7% below peak & 106% above Q3 89 NI peak Q2 07 143% rise in 5yrs UK peak Q3 89 121% rise in 5yrs 200 UK returns to house price peak in almost 7.5 years 150 100 50 Q3 2013 50% below peak 23% above Q3 2002 Source: DCLG & UB Calculations UK (1984 Q3 - 1999 Q3) Ye ar 9 Ye ar 10 Ye ar 11 Ye ar 12 Ye ar 13 Ye ar 14 Ye ar 15 Ye ar 8 Ye ar 7 Ye ar 6 Ye ar 5 Ye ar 4 Ye ar 3 Ye ar 2 Ye ar 1 Ye ar 0 0 NI (2002 Q3 - 2013 Q3) Slide 29
  • 30. Longer-term NI’s relative house prices should track relative economic prosperity (UK excl. London & the South East)… Relative Average House Prices Index NI v UK (Excluding London & South East) 120 NI below long-term estimate of 'fair value' NI = UK ex LSE 100 60 Source: DCLG, ONS & UB NI's relative economic prosperity GVA per capita relative to UK ex LSE NI below UK ex LSE 80 NI above UK ex LSE 140 Feb-02 Oct-03 Jun-05 Feb-07 Oct-08 Jun-10 Feb-12 Oct-13 Slide 30
  • 31. …indeed NI has already returned to the bottom of the UK regional house price table…. Average House Prices September 2013 £K 450 **Mortgages Only Excludes Cash / Auction Sales** Average FTB House Prices September 2013 £K 350 **Mortgages Only Excludes Cash / Auction Sales** Source: ONS 400 Source: ONS 300 350 250 300 200 245k 250 150 192k 200 184k 150 127k 95k 100 100 Lon SE East UK SW UK WM Scot excl LSE EM Y&H NW Wal NE NI 50 Lon SE UK East SW WM EM Y&H NW Scot Wal NE Slide 31 NI
  • 32. …. a far cry from the halcyon days of 2007 £ Average House Prices August 2007 Source: DCLG & permanent TSB/ESRI 400,000 Average FTB House Prices August 2007 £k Source: DCLG 275 350,000 300,000 225 249k 250,000 189 167 175 219k 203k 200,000 125 150,000 100,000 75 Lon Dub SE NI East SW UK RoI WM EM Wal Y&H NW Scot NE Lon SE NI East SW UK WM EM Wal Scot NW NE Slide 32 Y&H
  • 33. Mortgage Activity / Housing Transactions Slide 33
  • 34. HMRC residential property transactions (Quarterly & Rolling Annual Sum) Northern Ireland Residential Property Transactions  Northern Ireland Residential Property Transactions  4 Quarter Rolling Sum All Transactions 2005 Q1 2005 Q2 2005 Q3 2005 Q4 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 Q/Q Change Y/Y Change Last 4 Quarters Detached Semi‐Detached Terraced Apartments 3,010 8,055 8,500 9,667 8,694 10,889 10,901 10,903 8,749 9,378 6,829 4,330 3,039 3,347 2,272 2,255 2,015 2,846 3,262 3,600 2,538 2,712 2,719 2,819 2,418 2,627 3,216 3,085 3,196 3,136 3,574 3,778 3,396 3,744 4,001 829 2,240 2,314 2,515 2,221 2,851 2,996 2,787 2,212 2,338 1,935 1,162 788 824 609 620 536 737 871 999 650 744 712 828 664 766 964 900 947 902 1,122 1,177 1,015 1,149 1,272 917 2,502 2,675 3,018 2,676 3,259 3,146 3,149 2,482 2,706 1,893 1,226 884 1,036 691 722 674 1,027 1,126 1,243 807 928 909 845 774 812 1,029 989 975 979 1,141 1,157 1,059 1,160 1,206 1,062 2,828 2,970 3,511 3,208 3,907 3,910 4,098 3,363 3,599 2,476 1,516 1,128 1,166 796 746 628 851 1,036 1,106 859 852 964 938 820 818 952 933 1,024 992 1,035 1,178 1,051 1,201 1,241 202 485 541 623 589 872 849 869 692 735 525 426 239 321 176 167 177 231 229 252 222 188 134 208 160 231 271 263 250 263 276 266 271 234 282 11% 13% 4,613 4% 6% 4,582 3% 20% 4,671 21% 2% 1,053 7% 12% 14,919 Source: DFP NI RPPI November 2013 All Transactions 2005 Q4 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 Q/Q Change Y/Y Change 2013 Q3 v Peak Rise from Low Detached Semi‐Detached Terraced Apartments 29,232 34,916 37,750 40,151 41,387 41,442 39,931 35,859 29,286 23,576 17,545 12,988 10,913 9,889 9,388 10,378 11,723 12,246 12,112 11,569 10,788 10,668 10,583 11,080 11,346 12,124 12,633 12,991 13,684 13,884 14,492 14,919 7,898 9,290 9,901 10,583 10,855 10,846 10,333 9,272 7,647 6,223 4,709 3,383 2,841 2,589 2,502 2,764 3,143 3,257 3,264 3,105 2,934 2,948 2,970 3,222 3,294 3,577 3,713 3,871 4,148 4,216 4,463 4,613 9,112 10,871 11,628 12,099 12,230 12,036 11,483 10,230 8,307 6,709 5,039 3,837 3,333 3,123 3,114 3,549 4,070 4,203 4,104 3,887 3,489 3,456 3,340 3,460 3,604 3,805 3,972 4,084 4,252 4,336 4,517 4,582 10,371 12,517 13,596 14,536 15,123 15,278 14,970 13,536 10,954 8,719 6,286 4,606 3,836 3,336 3,021 3,261 3,621 3,852 3,853 3,781 3,613 3,574 3,540 3,528 3,523 3,727 3,901 3,984 4,229 4,256 4,465 4,671 1,851 2,238 2,625 2,933 3,179 3,282 3,145 2,821 2,378 1,925 1,511 1,162 903 841 751 804 889 934 891 796 752 690 733 870 925 1,015 1,047 1,052 1,055 1,076 1,047 1,053 3% 19% ‐58% 84% 1% 12% ‐63% 47% 5% 17% ‐69% 55% 1% 0% ‐68% 53% 3% 15% ‐64% 59% Source: DFP NI RPPI November 2013 Slide 34
  • 35. Property transactions in Q3 2013 hits highest level since Q4 2007, due to pick-up in cash sales & mortgages Northern Ireland Mortgages (CML) & Residential Property Transactions* (RPT): Quarterly 14000 Source: CML & DFP / HMRC Residential Property Transactions, * Includes cash sales 12000 10000 The larger the difference between the two was largely an indication of non-CML mortgages & cash sales. Now it is almost entirely due to cash sales 8000 6000 4000 2000 0 2005 Q3 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 CML Mortgages DFP / HMRC Residential Property Transactions Slide 35
  • 36. NI mortgage activity increases by 22% q/q in Q3 Q/Q NI Mortgages (CML) & Residential Property Transactions (RPT): Quarterly Growth 60% CML DFP/HMRC RPT 45% 30% 21.7% 15% 6.9% 0% -15% -30% -45% Source: CML & DFP / HMRC Residential Property Transactions (RPT include cash sales) -60% 2005 Q3 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 Slide 36
  • 37. Mortgage activity up 22% y/y in Q3 & overall transactions up 12% y/y (difference due to rise in auction / cash sales) Y/Y NI Mortgages (CML) & Residential Property Transactions (RPT): Y/Y Growth 75% CML 60% DFP/HMRC RPT 45% 30% 21.7% 15% 11.9% 0% -15% -30% -45% -60% -75% Source: CML & DFP / HMRC Residential Property Transactions (RPT Include cash sales) -90% 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 Slide 37
  • 38. 9,500 NI mortgages for house purchase over the year to Q3 2013. Up 6% y/y & 23% above 2008 low… NI Mortgage Activity 000s 40 NI Mortgage Activity Y/Y% Growth All Loans for House Purchase All Loans for House Purchase Annual % Growth 60% Source: CML, *4 Quarters to Q3 2013 Q3 35 40% 30 25 20% No data available 5.6% 20 0% 15 9.5 10 5 -20% -40% Source: CML, *4 Quarters to Q3 2013 Q3 - -57.2% * 13 1978 1983 1988 1993 1998 2003 2008 20 10 20 07 20 04 20 01 20 98 19 95 19 92 19 89 19 86 19 83 19 80 19 77 19 19 74 -60% Slide 38 2013*
  • 39. …first-time buyer market posts a larger rise with 5,600 loans in the 4 quarters to Q3 2013. 93% above 2008 low… NI Mortgage Activity 000s 25 NI Mortgage Activity Y/Y% Growth Loans for First-Time Buyers Only Loans for First-Time Buyers Annual % Growth 80% Source: CML, *4 Quarters to Q3 2013 Q3 60% 20 40% 15 No data available 20% 10 9.8% 0% 5.6 5 -20% -40% Source: CML, *4 Quarters to Q3 2013 Q3 - -49.1% * 13 20 10 20 07 20 04 20 01 20 98 19 95 19 92 19 89 19 86 19 83 19 80 19 77 19 19 74 -60% 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Slide 39 2013*
  • 40. …while second hand market (‘Home Movers’) still experiencing weakest activity since 1974… NI Mortgage Activity 000s NI Mortgage Activity Loans for Home Movers 25 Y/Y% Growth Loans for Home-Movers Annual % Growth Source: CML, *4 Quarters to Q3 2013 Q3 50% 20 30% 15 10% No data available -2.6% -10% 10 -30% 5 3.8 -50% Source: CML, *4 Quarters to Q3 2013 Q3 -60.5% 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013* -70% 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013* Slide 40
  • 41. …NI’s recovery within the mortgage market continues to lag the UK Mortgage Activity Y/Y 45% NI Mortgage Activity Y/Y Loans for Home-Movers % Y/Y Growth Loans for First-Time Buyers % Y/Y Growth 75% UK NI 30% 15% 45% 0% UK 60% 30% 15% -15% 0% -30% -15% -45% -30% -60% -45% Source: CML, *4 Quarters to Q3 2013 Q3 Source: CML, *4 Quarters to Q3 2013 Q3 -60% -75% 2001 2003 2005 2007 2009 2011 2013* 2001 2003 2005 2007 2009 2011 Slide 41 2013*
  • 42. Residential property transactions up 15% y/y in Q3 2013 but volumes over the year to Q3 are 64% below 2006 levels NI Residential Property Transactions All NI Residential Property Transactions Rolling 4 Quarter Sum Quarterly 12,000 Includes Auction Sales 50,000 **Includes Auction Sales** Source: DFP RPPI 41,442 40,000 10,000 8,000 64% below peak but 59% above low 30,000 6,000 20,000 4,000 10,000 2,000 14,919 Source: DFP 9,388 - - 2005 Q3 2007 Q3 2009 Q3 2011 Q3 2013 Q3 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 Slide 42
  • 43. The value of NI’s property transactions has fallen by £5.7bn (80%) relative to peak Value of NI's Residential Property Transactions (Transactions x Standardised Price) Quarterly £Bn 2.5 Quarterly Left Axis Annual Right Axis Annual £Bn 8 Source: DFP NI RPPI £7.1bn 7 80% fall 2.0 6 5 1.5 4 1.0 £1.44bn 3 2 0.5 1 0.0 2006 Q3 0 2008 Q2 2010 Q1 2011 Q4 2013 Q3 Slide 43
  • 44. …with the FTB market accounting for almost 60% of all NI mortgage activity – its highest share since 2001 First-Time Buyer Share of the Market 80% NI UK 70% 58.9% 60% 50% 43.5% 40% 30% Source: CML, *4 Quarters to Q3 2013 Q3 20% 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013* Slide 44
  • 45. The number of NI remortgages has plummeted as well NI Remortgages - Number of Loans Quarterly K 10 32.9K Source: CML 9 Annual K 35 86% decline 8 30 25 7 6 20 5 15 4 3 4.7K 10 2 5 1 0 0 2005 Q2 2006 Q1 2006 Q4 2007 Q3 2008 Q2 2009 Q1 Quarterly (Left Hand Side) 2009 Q4 2010 Q3 2011 Q2 2012 Q1 2012 Q4 2013 Q3 Rolling Annual Total (Right Hand Side) Slide 45
  • 46. …with the UK remortgage market not faring much better Remortgage Activity Levels Levels % Y/Y Growth 30% 140 NI Remortgage Activity Y/Y 2006 = 100 Rolling 4 Quarter Total NI UK 120 15% 100 0% 80 -15% 60 UK -30% 40 -73% below 2006 levels 20 0 2006 Q3 -84% below 2006 levels 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 -45% -60% Source: CML, *4 Quarters to Q3 2013 Q3 -75% 2007 2008 2009 2010 2011 2012 2013* Slide 46
  • 47. New house sales in NI still following a downward trajectory with sales 84% below 2006 levels… NI New House Sales Rolling Annual Sum 8000 Pre-crisis average 6000 4000 84% below peak 2000 Source: DSD / NHBC 0 2005 Q2 2007 Q2 2009 Q2 2011 Q2 2013 Q2 Slide 47
  • 48. …property legacy explains why NI’s Business Services & Finance output is some 51% below its Q4 2006 peak… NI Business Services & Finance Output Levels Index 2010 = 100 160 NI UK 145 51% below peak 130 115 0.3% below pre-downturn peak 100 85 70 Source: DFP Index of Services & ONS 55 2004 Q2 2005 Q4 2007 Q2 2008 Q4 2010 Q2 2011 Q4 2013 Q2 Slide 48
  • 49. …the rise of remortgaging was accompanied by a rise in housing equity withdrawal for spending on 2nd homes…. UK Housing Equity Withdrawal £Bn 20 HEW in £m % 10 HEW as a % of post-tax income 8 15 6 10 4 5 2 0 0 -5 -2 -10 -4 -15 -6 Source: BoE -8 -20 Jun-99 Jun-01 Jun-03 Jun-05 Jun-07 Jun-09 Jun-11 Jun-13 Slide 49
  • 50. …or a new car. Decreases in remortgaging / equity withdrawal is one factor behind decline in new car sales 17,143 fewer NI new car sales relative to 2007 peak New Car Registrations 12 Month Rolling Sum Index 70,000 Indexed 2007 =100 120 80,000 Sales now 26% below peak 68,708 NI Scotland Wales UK RoI Pre-Recession Peak +1% 100 -7% 80 60,000 -25% 57,170 60 50,000 51,565 47,580 40 Temporary reduction in VAT rate to 15% & 'Cash for Clunkers' 40,000 -60% 20 Source: SMMT Source: SMMT & SIMI 30,000 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 0 Dec-07 Feb-09 Apr-10 Jun-11 Aug-12 Slide 50 Oct-13
  • 51. Levels of mortgage activity in both the UK & NI remain well below 2006 (pre-crisis) levels… NI & UK Mortgage Activity Levels:First-Time Buyers NI & UK Mortgage Activity Levels: All Loans 2006 =100 Rolling 4 Quarter Total 2006 =100 Rolling 4 Quarter Total 120 120 NI NI UK 100 100 80 UK 80 48% below 2006 levels 60 40 37% below 2006 levels 60 40% below 2006 levels 40 65% below 2006 levels 20 Source: CML 0 2006 Q3 2007 Q3 20 Source: CML 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 0 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 Slide 51 2013 Q3
  • 52. … the ‘Home Movers’ segment remains virtually stagnant. FTBs more likely to go for new builds rather than 2nd hand dwellings NI & UK Mortgage Activity Levels: Home-Movers Mortgage Activity (Home Movers) 2013 Q3* 2006 = 100 Rolling 4 Quarter Total Relative to Pre-Credit Crunch Levels (2006) 120 NI 40% UK Source: CML, * 4 Quarters to 2013 Q3 100 20% 80 0% 60 54% below 2006 levels -20% -40% 40 -60% 20 78% below 2006 levels Source: CML 0 2006 Q3 -80% NI 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 UK -100% Peak to Trough Decline Recovery From Trough Net Position Slide 52
  • 53. NI posted steeper decline & stronger recovery than UK in FTB market but their net position is similar First-Time Buyer Mortgage Activity 2013 Q3* Mortgage Activity (All Loans) 2013 Q3* Relative to Pre-Credit Crunch Levels (2006) Relative to Pre-Credit Crunch Levels (2006) 100% 60% Source: CML, * 4 Quarters to 2013 Q3 Source: CML, * 4 Quarters to 2012 Q3 75% 40% 50% 20% 25% 0% 0% -20% -25% -40% -50% -60% NI -75% UK -80% NI Peak to Trough Decline Recovery From Trough Net Position UK -100% Peak to Trough Decline Recovery From Trough Net Position Slide 53
  • 54. Within Northern Ireland the Home Mover & Remortgage markets have fallen the most N.Ireland Mortgage & Remortgage Activity Levels 2006 = 100 Rolling 4 Quarter Total 140 All Mortgages First-Time Buyers Home Movers Remortgages 120 100 80 -40% 60 40 20 -65% -68% Source: CML 0 2006 Q3 2007 Q3 -86% from peak 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 Slide 54
  • 55. Residential property transactions (mortgages & cash sales) down 64% relative to 2006 levels NI Residential Property Transactions* Levels 2006 = 100 Rolling 4 Quarter Total 140 All Mortgages Remortgages Property Transactions RPPI 120 100 80 60 -64% -65% 40 20 Source: CML & DFP/HMRC Residential Property Transactions (RPT), * Includes cash sales 0 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 -84% below 2006 & 86% below peak 2012 Q3 2013 Q3 Slide 55
  • 56. Comparison between CML & HMRC property transactions suggests 30% of transactions are cash sales 000s 50 Northern Ireland Mortgages & Property Transactions* Rolling 4 Quarter Total Mortgages CML 40 DFP / HMRC Residential Property Transactions (RPT) Difference between two is an indication of cash sales & mortgage providers not in CML Difference between two is now a good indication of cash sales 30 20 10 Source: CML & DFP / HMRC Residential Property Transactions* (RPT includes mortgages & cash sales) 0 2005 Q3 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 Slide 56
  • 57. Over 1/3rd of mortgages advanced since 2005 in Northern Ireland were in negative equity in 2012 Residential Housing Negative Equity % Change in Residential Housing Negative Equity % of mortgages advanced since 2005 in negative equity % Point Change 40% % Point Change between Oct 2012 & Aug 2011 CML studies 8 Source: CML, October 2012 35% 35% +7pp 6 4 30% 2 25% 0 20% -2 15% -4 -4pp -6 10% 10% -8 5% -10 0% Source: CML, based on % of mortgages advanced since 2005 in negative equity -12 SE SW Lon East WM EM UK Scot NE Wal NW Y&H NI NE Y&H EM Lon WM UK NW SE SW East Scot Slide 57 Wal NI
  • 58. According to some estimates between 20-25% of all mortgage holders are in negative equity in N.Ireland Negative equity affected 10.5% of UK mortgage holders in the mid-1990s and was geographically concentrated in the southern regions of the UK. Today, negative equity is more prevalent in the northern UK regions. NI is the negative equity black spot in the UK. Source: FCA Risk Outlook 2013 Negative equity assessment made in January 2013 Slide 58
  • 59. Writs & summonses in respect of mortgages & mortgage possession orders remain at elevated levels NI Mortgage Possession Orders NI Mortgage Arrears Rolling Annual Average (Writs & Originating Sumonses in respect of mortgages) 5000 BoE Base Rate at Record Low UK Recession 3,905 4000 3,738 2500 **Not all writs & originating summonses (Actions for Mortgage Possession) or possession orders lead to eviction or re/possession** 2,216 2,136 2000 3000 1500 2000 1000 1000 500 Source: NI Courts Service, * 4Quarters to Q3 2013 Source: NI Courts Service 0 0 1981 1985 1989 1993 1997 2001 2005 2009 2013* 2004Q3 2006Q1 2007Q3 2009Q1 2010Q3 2012Q1 Slide 59 2013Q3
  • 60. Consumer stress will remain a major issue with the two legacies of unemployment and debt still to unwind… NI Consumer Stress NI Unemployment Claimant Count Levels Rolling 4 Quarter Total 5,000 Personal Insolvencies Actions for Mortgage Possession 4,500 140,000 Mortgage Possession Orders Oct 2013 64,900 at mid-1997 levels 120,000 4,000 3,738 Credit Crunch begins Aug 07 100,000 3,500 3,000 3,203 80,000 2,500 60,000 2,000 61,000 2,136 1,500 Good Friday Agreement signed April 1998 57,900 40,000 1,000 **Not all writs & originating summonses (Actions for Mortgage Possession) lead to eviction or re/possession** 500 Source: DFP Source: DETI Insolvency Service & NI Courts Service 0 2004Q3 2006Q1 2007Q3 2009Q1 20,000 2010Q3 2012Q1 2013Q3 Record low Aug 07 23,600 0 Oct-86 Oct-89 Oct-92 Oct-95 Oct-98 Oct-01 Oct-04 Oct-07 Oct-10 Oct-13 Slide 60
  • 61. …although employment growth (including full-time employment) has returned… NI Employee Jobs Q/Q % Change Excludes Self-Employed 1.0% Q/Q 0.8% Y/Y Discontinuity in Series Y/Y % Change 3% 1% 0.2% Full-Time & Part-Time Employee Jobs 10% Full-Time 2% 0.6% 0.4% NI Annual Employment Growth Y/Y 0% 0.0% 8% Part-Time Total Part-time employment growing at a much faster rate than full-time employment 6% Recovery in PartTime jobs 4% 2% -0.2% -1% -0.4% -2% 0% -0.6% -0.8% -3% Source: DFP -1.0% Q4 2006 Q4 2007 Q4 2008 -4% Q2 2010 Q2 2011 Q2 2012 Q2 2013 -2% Full-time employment fell at a much faster rate than part-time -4% Source: DFP, Figures are not seasonally adjusted -6% Jun-93 Dec-95 Jun-98 Dec-00 Jun-03 Dec-05 Jun-08 Dec-10 Jun-13 Slide 61
  • 62. …unemployment has been falling but for the under 25s (the first-time buyers of tomorrow) it remains a big problem ILO Unemployment Rates by Age-Group NI unemployment falling M/M 5,000 July-September 2013 Claimant Count Monthly Change 30% Source: DFP 4,000 25% Nov 2008 +3,200 3,000 20% 2,000 15% 1,000 -3,900 10% 0 5% -1,000 Source: DFP 0% -2,000 Apr-07 May-08 Jun-09 Jul-10 Aug-11 Sep-12 Oct-13 18-24 25-49 50+ Age Category 16+ Slide 62
  • 63. Student debt will affect FTB affordability. Over 109,000 borrowers with £1.2bn of outstanding student debt Income Contingent Repayments for NI Domiciled Students Studying in Higher Education in UK & EU Borrowers (000s) 120 No.of Borrowers with Outstanding Debt (000s) Debt (£bn) 1.4 Amount of Outstanding Debt (£bn) 1.2 100 80 Average debt for NI domiciled students leaving HE in 2012 was £15,690. *Not all of these students will remain in or return to Northern Ireland* 1 0.8 60 0.6 40 0.4 20 0.2 Source: The Student Loans Company 2013 0 0 1999/00 2001/02 2003/04 2005/06 2007/08 2009/10 2011/12 Slide 63
  • 64. Housing Starts / Housing Completions Slide 64
  • 65. Housing starts were still falling in 2012 but expected to bottom-out in 2013… NI House Starts Rolling Annual Sum 20000 NHBC Non-NHBC 16000 12000 2006 2007 2008 2009 2010 2011 2012 2013 NHBC 8,600 7,500 3,100 3,500 3,200 2,000 1,700 1,900* Total 15,260 13,000 7,380 7,480 7,830 6,490 6,180 5,940** * 4 quarters to Q3 2013 **4 quarters to Q2 2013 8000 4000 Source: DSD & NHBC,NHBC now account for <30% of total NI private sector activity 0 2004Q3 2005Q4 2007Q1 2008Q2 2009Q3 2010Q4 2012Q1 2013Q2 Slide 65
  • 66. …as the most recent data signals an upward trajectory Annual Growth in NI Housing Starts Y/Y 150% All Starts NHBC 100% 50% 0% -50% Source: DSD & NHBC, * NHBC now account for <30% of total private sector NI activity -100% 2004Q3 2006Q1 2007Q3 2009Q1 2010Q3 2012Q1 2013Q3 Slide 66
  • 67. Over the last 6/7 years housing starts in Northern Ireland have fallen further than elsewhere in the UK … Housing Starts Rolling Annual Sum 2006=100 Index 2006=100 125 UK Wales Scotland NI England 100 Q2 2013 40% below peak Q1 2013 46% below peak Q2 2013 46% below peak 75 Q1 2013 56% below peak 50 25 Q2 2013 61% below peak Source: DSD & DCLG 0 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 Slide 67
  • 68. … but not as bad as the Republic of Ireland Housing Starts Index 2006=100 Rolling Annual Sum 2006=100 125 UK NI RoI 100 75 Q1 2013 46% below peak 50 Q2 2013 61% below peak 25 Q3 2013 94% below peak Source: DSD, DCLG & DoE 0 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 Slide 68
  • 69. NI & UK have experienced similar peak-to-trough declines Housing Starts 60% Peak-to-Trough Fall Recovery from Trough Net Position 40% 20% 0% -20% -40% -60% -80% Source: DSD, DCLG & CSO, NI as of Q2 2013, Eng Q2 13, Wal Q2 13, Scot Q1 13, UK Q1 13 & RoI Q3 13 -100% UK England Scotland Wales NI RoI Slide 69
  • 70. The RoI has experienced the steepest decline in housing starts with England posting the strongest recovery Housing Starts Peak-To-Trough* Recovery-from-Trough Net Position** UK (as of Q1 2013)  ‐56.8% 25.3% ‐45.8% England (as of Q2 2013) ‐59.0% 46.5% ‐39.9% Scotland (as of Q1 2013) ‐56.5% 1.4% ‐55.9% Wales (as of Q2 2013) ‐58.8% 30.8% ‐46.2% Northern Ireland (as of Q2 2013) Republic of Ireland (as of Q3 2013) ‐64.7% 10.2% ‐61.1% ‐95.0% 11.5% ‐94.4% Source: DSD & DCLG, *pre‐recession peak to trough over a 4 quarter period, ** latest position (last 4 quarters) relative to pre‐recession peak Slide 70
  • 71. Annual rate of growth in house completions hits 52% in Q2 2013 with NHBC signalling a flat reading in Q3 2013… Annual Growth in NI Housing Completions Y/Y 80% All NI Completions NHBC Completions 60% 40% 20% 0% -20% -40% Source: DSD & NHBC,NHBC now accounted for just 30% of total NI private sector activity -60% 2004Q3 2006Q1 2007Q3 2009Q1 2010Q3 2012Q1 2013Q3 Slide 71
  • 72. …. 2013 should emerge as the 2nd successive year of growth following 5 years of contraction NI House Completions Rolling Annual Sum 20,000 NHBC Non-NHBC 16,000 12,000 2006 2007 2008 2009 2010 2011 2012 2013 NHBC 10,200 8,000 5,400 4,600 3,500 2,700 2,200 2,100** Total 17,965 14,510 10,800 9,430 8,040 6,970 7,920 8,713* * Last 4 quarters to Q2 2013 ** Last 4 quarters to Q3 2013 8,000 4,000 Source: DSD & NHBC, * NHBC now accounts for only 25% of total private sector NI activity 0 2004Q3 2006Q1 2007Q3 2009Q1 2010Q3 2012Q1 2013Q3 Slide 72
  • 73. NI has witnessed steeper declines than elsewhere Housing Completions Rolling Annual Sum 2006=100 Index 2006=100 125 Source: DSD & DCLG 100 Q2 2013 40% below peak 75 46% below peak 50 46% below peak 52% below peak 25 Wales Scotland NI England 0 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 Slide 73
  • 74. … but not as bad as the Republic of Ireland Housing Completions Index 2006=100 Rolling Annual Sum 2006=100 125 UK NI RoI 100 Q1 2013 40% below peak 75 50 Q2 2013 52% below peak Q2 2013 91% below peak 25 Source: DSD, DCLG & DoE 0 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 Slide 74
  • 75. RoI house completions remain 91% below their pre-crisis peak which compares with 52% & 40% for NI & the UK House Completions Peak-to-Trough Fall Recovery from Trough Net Position 40% 20% 0% -20% -40% -60% -80% Source: DSD, DCLG & CSO, NI as of Q2 2013, Eng Q2 13, Wal Q2 13, Scot Q1 13, UK Q1 13 & RoI Q3 13 -100% UK England Scotland Wales NI RoI Slide 75
  • 76. RoI & NI house-building sectors have experienced steepest declines to date. But NI has shown some recovery Housing Completions Peak-To-Trough* UK (as of Q1 2013)  England (as of Q2 2013) Scotland (as of Q1 2013) Wales (as of Q2 2013) Northern Ireland (as of Q2 2013) Republic of Ireland (as of Q3 2013) Recovery-from-Trough Net Position** ‐40.3% 0.0% ‐40.3% ‐39.6% 0.0% ‐39.6% ‐46.5% 0.0% ‐46.5% ‐45.6% 0.0% ‐45.6% ‐66.1% 31.5% ‐51.5% ‐91.3% 0.0% ‐91.3% Source: DSD, DCLG & DoE, *pre‐recession peak to trough over a 4 quarter period, ** latest position (last 4 quarters) relative to pre‐recession peak Slide 76
  • 77. House completions increased in 2012 & 2013 from 2011 low. Rise linked to completion of unfinished stock NI Housing Completions 20,000 Total Completions 16,000 Projected Need* 25 year Average 1998-2015 12,200 2008-2025 11,200 12,000 8,000 4,000 Source: DSD & UB Forecasts, * refers to official projections from published sources 0 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013f Slide 77
  • 78. …but spare a thought for the RoI. Northern Ireland does not have the same overhang of stock as the RoI… Republic of Ireland Housing Completions 100,000 Source: DoE & UB Forecasts 91% fall 80,000 60,000 40,000 20,000 7.5k 9k 0 1971 1977 1983 1989 1995 2001 2007 2013(f) Slide 78
  • 79. …but NI is still building fewer houses per capita than it was back in 1960…longer-term implications?? NI Housing Completions per 1,000 Population 12 2006 10.3 Source: DSD, NISRA & UB Calculations 10 8 6 2013 2011 4.7 3.8 4 2 3 20 1 0 20 1 7 20 0 4 20 0 1 20 0 8 19 9 5 19 9 2 19 9 9 19 8 6 19 8 3 19 8 0 19 8 7 19 7 4 19 7 19 7 1 0 Slide 79
  • 80. The Republic of Ireland is building even fewer houses per capita as it has an overhang of excess supply RoI House Completions per 1,000 pop 25 Source: DoE / UB 20.9 20 15 10 5 1.6 0 1971 1977 1983 1989 1995 2001 2007 2013(f) Slide 80
  • 81. Despite the slump in house building, NI is building at three times the rate of the RoI & twice the rate of the UK House Completions per 1,000 Population 25 UK 20 NI RoI 20.9 RoI was building at twice the rate of NI which was building at close three times the rate of the UK 15 10.3 10 5 4.7 2.2 3.7 Source: DSD, ONS, DoE, CSO & UB Calculations 1.6 19 71 19 73 19 75 19 77 19 79 19 81 19 83 19 85 19 87 19 89 19 91 19 93 19 95 19 97 19 99 20 01 20 03 20 05 20 07 20 09 20 11 20 13 0 Slide 81
  • 82. Housing Affordability / Interest Rates Slide 82
  • 83. Regional house prices are a function of supply & demand dynamics. But fundamentals such as wages are key Median Gross Weekly Earnings 2013 Median Gross Annual Earnings 2013 £ £ per wk All Employees Full-Time 35,000 All Employees Full-Time 700 Source: DFP & ONS ASHE Source: DFP ASHE 32,500 650 30,000 600 27,500 27,017 550 517.5 25,000 23,904 500 460 22,500 450 20,000 400 Lon SE East UK Scot SW EM WM NW Y&H Wal NE NI Lon SE UK Scot East WM NW SW Y&H EM Wal NE Slide 83 NI
  • 84. In NI, the rate of inflation has outpaced earnings growth for most individuals % Change in N.Ireland Median Wages v UK Inflation Cumulative Increase 2007-2013* 30% Source: DFP ASHE & ONS, * April each year 25% 20% 15% 10% 5% 0% Total Public Private All Employees Total Public Private Full-Time Employees Only CPI RPI Inflation Slide 84
  • 85. After inflation the median private sector wage has fallen by almost 20% in real terms (after CPI inflation) % Change in N.Ireland Median Wages in Real Terms Cumulative Increase 2007-2013* 10% Source: DFP ASHE & ONS, * April each year 5% 0% -5% -10% -15% -20% -25% Total Public Private All Employees (Full-Time & Part-Time) Total Public Private Full-Time Employees Only Slide 85
  • 86. Those aged under 30 years of age have median earnings below the NI average… NI Annual Median Gross Pay By Age-Group £000 30 Full-Time Employees 2013 NI Average for all age-groups Source: DFP ASHE, April 2013 25 20 17.5 15 10 5 0 Age 18-21 Age 22-29 Age 30-39 Age 40-49 Age 50-59 Age 60+ Slide 86
  • 87. … & those under 40 (including the household formation 25-34 yrs category) have experienced the biggest falls in real earnings NI Gross Median Wages for Full-Time Employees Cumulative Change in Real Terms 2007-2013* 0% -5% -6.3% -10% NI average change for employees from all age-groups -15% -20% Source: DFP ASHE & ONS, *using CPI inflation in April each year -25% Age 18-21 Age 22-29 Age 30-39 Age 40-49 Age 50-59 Age 60+ Slide 87
  • 88. The average incomes of borrowers was £42k in Q3 2013 Average incomes of N.Ireland Mortgage Borrowers £k 60 Source: ONS, Regulated Mortgage Survey 51k 50 42k 40 38k 32k 30 20 10 New Dwellings All Dwellings First-Time Buyers Former Owner-Occupiers 0 1992 Q3 1995 Q3 1998 Q3 2001 Q3 2004 Q3 2007 Q3 2010 Q3 2013 Q3 Slide 88
  • 89. According to the CML mortgage interest payments as a % of income are at their lowest levels since Q3 1996 Northern Ireland Mortgage Affordability Northern Ireland Mortgage Affordability % of income 30 Median for First-Time Buyer Borrowers Interest Payments Median for All Borrowers % of income 30 Interest Payments Capital & Interest Payments Capital & Interest Payments 25 26.2 24.9 25 21.9 18.9 20 20 16.6 17.1 15 15 10 10 10.2 8.4 8.1 5 5 Source: CML Source: CML 0 1979Q3 8.9 0 1983Q4 1988Q1 1992Q2 1996Q3 2000Q4 2005Q1 2009Q2 2013Q3 1979Q3 1983Q4 1988Q1 1992Q2 1996Q3 2000Q4 2005Q1 2009Q2 2013Q3 Slide 89
  • 90. NI’s HPE ratio has dipped below the pre-boom longterm average (1997-2005) & is back to late 1990s levels… Halifax House Price to Earnings Ratio All Houses & All Buyers 10 NI UK NI Pre-Boom LTA (1997-2005) 9 8.6 8 7 6 5 4.3 4 3.5 3 3.0 2 1 Source: Halifax, based on gross average annual salary of a male full-time employee 0 1997 Q4 2000 Q1 2002 Q2 2004 Q3 2006 Q4 2009 Q1 2011 Q2 2013 Q3 Slide 90
  • 91. …and NI mortgage payments as a % of disposable income is lower than at anytime in over 30 years Mortgage Payments as a % Average Disposable Income All Houses & All Buyers % Source: Halifax 70 65.5 64.1 60 47.7 50 40 27.9 30 20 18.1 16.8 10 NI UK NI Pre-Boom Average 1997-2005 0 1984 Q3 1990 Q2 1996 Q1 2001 Q4 2007 Q3 2013Q2 Slide 91
  • 92. NI’s HPE ratio for first-time buyers is in line with the pre-boom 10-yr average of 3.2… Nationwide FTB House Price to Earnings Ratio 9 N Ireland UK NI Pre-Boom LTA 8 NI 10-Yr Pre-boom Average 8.1 7 6 5.4 5 4.6 4 3.3 3 2 1 Source: Nationwide 0 1984 Q4 1990 Q3 1996 Q2 2002 Q1 2007 Q4 2013 Q3 Slide 92
  • 93. NI FTB affordability index is at Q1 1998 levels FTB Mortgage Payments as a % of Mean Take Home Pay 80% NI UK NI Pre-Boom LTA 74.8% 70% 60% 55.8% 51.8% 50% 40% 32.6% 30% 20% 23.7% 15.1% 10% Source: Nationwide 0% 1983 Q2 1989 Q2 1995 Q2 2001 Q2 2007 Q2 2013 Q2 Slide 93
  • 94. …but its not just after tax income that is important. Income after necessities (food & energy) is important Index 2005 = 100 225 Mortgage Affordability & CPI (FBTE) Inflation Halifax Affordability Index Food, Drink, Tobacco & Energy CPI Nationwide FTB Affordability Index No Change 200 42% rise relative to house price peak 175 150 +57% 125 100 -62% below Q2 2007 peak 75 Source: ONS, Halifax & Nationwide (FTB) affordability indices all rebased 2005=100 -68% below peak 50 2005 Q3 2007 Q3 2009 Q3 2011 Q3 2013 Q3 Slide 94
  • 95. Between Q2 2007 & December 2013 the price of a tank of petrol / diesel has risen from £57/58 to £78/83 (35-43% rise) UK Fuel Prices - Tank* of Petrol / Diesel £ (*60 Litres) 100 Petrol Diesel £88.8 90 Emergency Budget June 2010 £83.1 80 £78.5 NI House Price Peak 70 60 50 £51.3 'Credit Crunch' begins 40 30 Source: ONS Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Slide 95
  • 96. Inflation has contributed to income squeeze which in turn has deferred the deleveraging of household debt… UK Average Weekly Earnings & CPI Inflation % 6 Ave Weekly Earnings 3m Y/Y % (Excl. Bonuses) CPI Y/Y 5 4 3 Income squeeze NICE Decade 2 2.2% 1 Does not include taxes or changes to benefits Source: ONS 0.8% 0 Oct-01 Oct-03 Oct-05 Oct-07 Oct-09 Oct-11 Oct-13 Slide 96
  • 97. Since Aug-07 CPI has risen by 21% which compares with a rise in average earnings of 11% Cumulative % Change in UK Consumer Prices since 'Credit Crunch' began (Aug 07 to Oct 13) 70% Source: ONS, *Average Earnings as of September 2013 60% 50% 40% 30% 21.2% 20% 11.0% 10% 0% Electricity Transport Transport Hotels & Total CPI Average Food & Non- Food Earnings* Gas & Other Fuels & Services Restaurants Alcoholic Fuels Lubricants Beverages Slide 97
  • 98. The Bank of England will not keep its bank rate at a record low forever… The Bank Rate 1700‐2013 3 Slide 98
  • 99. …record low in 5-yr swap rates has been & gone… % UK Base Rate v 3 month Libor v 5Yr Swap (weekly) 8 7 Rise in swap rates preceeds base rate hikes Source: Bloomberg 6 5 4 3 1.87% 2 1 0 Dec-99 Base Rate Dec-01 3mth Libor Dec-03 Dec-05 5Yr Swap Dec-07 Dec-09 Dec-11 Dec-13 Slide 99
  • 100. … the record low in 10-yr swap rates has also been and gone UK Base Rate v 3 month Libor v 10Yr Swap % 8 7 (weekly) Source: Bloomberg Rise in swap rates preceeds base rate hikes 6 5 4 3 2.8% 2 1 0 Dec-01 Base Rate Dec-03 3mth Libor Dec-05 10 Yr Swap Dec-07 Dec-09 Dec-11 Dec-13 Slide 100
  • 101. Average interest rate on 5-yr fixed rate mortgages (75% LTV) has recently hit a record low. 2-yr fixes also falling UK Average Mortgage Rates % 9 Source: BoE 8 7 6 5 4.42 4 4.36 3.37 3 3.15 2 1 Bank Rate Tracker Mortgage SVR 5-yr Fixed LTV 75% 2-Yr Fixed 90% LTV 0 Jan-01 Jun-02 Nov-03 Apr-05 Sep-06 Feb-08 Jul-09 Dec-10 May-12 Oct-13 Slide 101
  • 102. Demographic Trends & Projections Slide 102
  • 103. NI’s household formation group has almost peaked but is set to fall during the next decade NI Household Formation Group 25-34 yrs of Age 000s 300 Aged 25-34 years of age (Left Hand Scale) % of population (Right Hand Scale) % 16 275 15 250 14 225 13 200 12 175 11 Source: NISRA 150 1971 10 1977 1983 1989 1995 2001 2007 2013 2019 2025 2031 2037 Slide 103
  • 104. No. of individuals in 30s & 40s set to fall & will be outnumbered by those in 50s & 60s by 2030. Will impact on future demand for upsizing / downsizing Northern Ireland Population Projections 000s 550 Population aged in their 30s & 40s Population aged in their 50s & 60s 525 500 475 450 425 400 375 Source: NISRA 350 2012 2016 2020 2024 2028 2032 2036 Slide 104
  • 105. The no. of people aged >65 yrs is set to increase by 200k (+68%) over the next 24 years. How will housing supply adapt to changing demand? Northern Ireland's Population & Projections 000s 600 Aged <16 years of age Aged 65+ years of age 500 400 300 200 100 Source: NISRA 0 1971 1977 1983 1989 1995 2001 2007 2013 2019 2025 2031 2037 Slide 105
  • 106. Disclaimer This document is issued for information purposes only for clients of Ulster Bank Group who are eligible counterparties or professional customers, and does not constitute an offer or invitation to purchase or sell any instrument or to provide any service in any jurisdiction where the required authorisation is not held. Ulster Bank and/or its associates and/or its employees may have a position or engage in transactions in any of the instruments mentioned. The information including any opinions expressed and the pricing given, is indicative, and constitute our judgement at time of publication and are subject to change without notice. The information contained herein should not be construed as advice, and is not intended to be construed as such. This publication provides only a brief review of the complex issues discussed and readers should not rely on information contained here without seeking specific advice on matters that concern them. Ulster Bank make no representations or warranties with respect to the information and disclaim all liability for use the recipient or their advisors make of the information. Over-the-counter (OTC) derivates can involve a number of significant and complex risks which are dependent on the terms of the particular transaction and your circumstances. In the event the market has moved against the transaction you have undertaken, you may incur substantial costs if you wish to close out your position. Ulster Bank Limited Registered Number: R733 Northern Ireland. Registered Office: 11-16 Donegall Square East, Belfast BT1 5UB.Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Member of The Royal Bank of Scotland Group. Calls may be recorded. Slide 106