Slugger O'Toole

Conversation, politics and stray insights

In the UK housing market it’s back to the 1970s

Sat 2 February 2013, 11:54pm

The ever widening gap in regional property values is spelt out in Mail Online is even more remorseless detail than the news section of its source, the upmarket estate agents Savils.

Homes in the ten richest London boroughs are worth the combined total of houses in Scotland, Wales and Northern Ireland, it emerged yesterday.

And in a dramatic illustration of the growing wealth gap between the South East and the rest of the UK, a survey has revealed that Elmbridge, a borough in the Surrey stockbroker belt, has a housing stock of £31 billion – £2 billion more than the whole of Glasgow.

Northern Ireland’s housing stock of 765,000 properties is worth £72 billion. The region has experienced the steepest fall in a single year -just over 10% last year or 50% over 5 years. Still, one person’s investment disaster is another’s opportunity. To us oldies it’s a gap that’s just  like old times, when we painfully straddled the Irish Sea…..

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Comments (14)

  1. Ulick (profile) says:

    Okay… right so how does all this compare against Dublin/Leinster, Munster & Connaught? The obvious thing to do would be to compare like against like, that is regions on the same feckin island.

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  2. leftofcentre (profile) says:

    Re ulick
    Well the story is from the uk daily mail, and I assume the data they are using only covers uk regions.

    Also I think it’s fair enough to compare a market with the same currency, same lenders etc

    I imagine the story in the south is similar. The Dublin area is probably worth more than the rest of the country combined.

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  3. Brian Walker (profile) says:

    Ulick, Nothing’s stopping you – but is it actually ” like for like” just because it’s in the same island? Discuss

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  4. Kensei (profile) says:

    It might not be like for like but the Northern market had a bigger boom and a bustier bust than the UK average. There was also an insane amount of Southern property money looking for returns. Coincidence?

    I’d love to see trend comparisons of the Republic, NI and English regions.

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  5. Alias (profile) says:

    “…Elmbridge, a borough in the Surrey stockbroker belt, has a housing stock of £31 billion – £2 billion more than the whole of Glasgow.”

    Which affirms the old adage about wealth gravitating toward the centre. 40 years after the old Scottish stock exchange merged with the London Stock Exchange what is left of Scottish industry other than oil/gas and financial services? It has a lot of small industrial and engineering companies that are too small for London but are an ideal fit for a new Scottish exchange. It’s a good example of how England gains by keeping the former nations subserient within a union.

    It’s a shame that London will lose a lot of this wealth when it finally becomes another fully-integrated region of the EU (within 20 years) as a lot of that expensive housing stock will be buy-to-let with the indigenous banks left with the mortgage bill when the tenants start moving elsewhere within the EU.

    Small is better, so a new stock exchange should be a priority for Scotland, independent or not.

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  6. Courtesy of Alias @ 5:19 pm:
    It’s a shame that London will lose a lot of this wealth when it finally becomes another fully-integrated region of the EU (within 20 years)…

    Phew! There’s an ambitious extrapolation!

    Even were that outcome to be achieved (and I, for one, wouldn’t be entirely hostile to the notion), London and the South-East would still be “at the heart of Europe”. Which is the root of the problem: consider the “Blue Banana” and the “Golden Triangle”.

    Look at what happened to the value of that previously-useless Grade 1 ruin at St Pancras. Given a two-hour link to Paris and Brussels, and the sky is the limit.

    Were I as confident as others of making predictions, I’d happily put money into property on the King’s Cross lands (indeed, my Pert Young Piece is that way inclined) or the old Woolwich Arsenal site (which is being sold, already, on the prospect of the Crossrail link to HS1).

    However, look a little further into the miasma that is the Daily Mail. There you may find what we London residents fully understand. The top end of the local property market was kept buoyant on bank bonuses. Now those are moderated (except for the most privileged few), it’s the foreign money that we’re counting on.

    As for Elmbridge (which translates as Esher, Walton-on-Thames and Weybridge), it comes down to (2011 figures):
    75% of people were employed, with average weekly incomes of £1,018.

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  7. Kensai – 3 February 2013 at 4:22

    I’d love to see trend comparisons of the Republic, NI and English regions.

    A few months ago, I collected the stats and made up a graph showing exactly that. I looked at Kensai’s wish and decided to plant it on my old blog.

    http://torystoryni.files.wordpress.com/2013/02/prop-prices-3-markes-historic.jpg

    The data used is the quarterly house price increases in the Republic of Ireland, Northern Ireland and the UK (Sources: Nationwide B.S. and Irish C.S.O). Average prices going back to 1973 have been used. Although Northern Ireland is included in the UK statistics, it is only about 2.5% of it and does not significantly make any difference to the overall UK figures.

    In 2006, a swarm of investors from the Republic bought up property in Northern Ireland. When the crash in ROI began, the Northern Ireland market fell rapidly. However, since the beginning of 2010, the Irish property market has more or less flatlined. In January 2010, the average price of an ROI dwelling was €226,245. In the second quarter of 2012 (the last published stat.), it is €227,376. In the UK, though with fewer peaks and troughs, the story is similar. In the first quarter of 2010, the Average UK dwelling was priced at £162,887. In the third quarter of 2012 it was £163,910.

    Northern Ireland compares very differently from those two markets. In the first quarter of 2010, the average price was £134,435. In the third quarter of 2012, the average price had fallen to £107,719 and is apparently on a continuing falling trend.

    I doubt that it has anything to do with income. Last year, the NI median salary was £18,720. Although the lowest paid region of the UK, it is still not far behind the UK average of £21,326. Furthermore, a BBC report published last year showed that Northern Ireland wages were rising faster than in the rest of the UK. It could be an oversupply of property as a result of NAMA offloading. My view is that it is more likely there is greater than average pessimism in the Northern Ireland population than elsewhere.

    Needless to say, the market will correct itself at some point.

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  8. Seymour Major @ 7:10 pm

    A very telling graphic, and a pertinent critique of recent social history: every picture tells a story (in this case, quite a few).

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  9. PaddyReilly (profile) says:

    I have been reprimanded before for confusing worth with value. The last time was when it was reported that the Royal Palace in Tokyo was ‘worth’ more than the whole state of California.

    This was the result of a ludicrous overvaluing in a Japanese hothouse bubble economy, which was corrected soon after. Anyone who invested in Tokyo property got burnt: in California, made a profit.

    All sorts of things could affect the price of property in suburban London. The bubble could burst: technological advances could mean working from home becomes the norm, high speed trains could render far flung regions commutable, rioting could destroy the infrastructure of the city, a terrorist attack of radioactive material could render the area unsafe, etc etc. I should also point out that the independence of Wales, Scotland and Northern Ireland will diminish the income of London by keeping the wealth of those areas in situ, rather than let it be sucked into London. So forbear: it might be very unwise to sell an estate in Scotland to buy a semi in Elmbridge.

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  10. PaddyReilly @ 8:55 pm:

    Valid, all valid.

    Except each of your suburban London scenarios would exacerbate the bad, growing and unacceptable property price-cliff between the South-East and the rest of the UK. Well, except the nuking of Greater London, obviously — except that Heathrow is probably the most “secure” location in Europe, and Elmbridge is, not coincidentally, under the flight-path.

    Of course, that ignores the fragility of sterling as a currency. But even that would not undermine the relative balance of property values inside the sterling area. Mr Salmond: the floor is yours …

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  11. aquifer (profile) says:

    Interesting graph, though maybe London should have its own line.

    The ROI line seems to be defying gravity, resisting further falls. Maybe what we are seeing is a refusal to sell and take a loss to go into negative equity. Also, NAMA was set up to hold property off the market until valuations recover. The banks may also have no appetite to realise losses by forcing repossessions and resales, risking blowing chunks out of their teetering balance sheets.

    The North historically had more houses almost paid for/ more equity, so people may be freeer to sell and take the loss without going into negative equity, knowing that they can buy something else cheaper. The steeper recent decline may reflect fundamentals better than the ROI graph, especially when cuts to housing benefit reduce the value of the cheaper buy to let homes.

    One reason to stay in NI used to be affordable housing to buy, it would be good to see that competitive advantage return. There is some good value at auction if you can gather up a lump of cash money.

    Or should the private renters unionise and decide rents?

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  12. jthree (profile) says:

    Seymour – those trend lines look bang on but I’ve never really trusted the Nationwide numbers for NI as they seem to be working off a small sample in comparison to the overall size of the market. The new NISRA series seems much more reliable as it also captures the data from cash sales/ repos.

    You may know better than me but I don’t think there’s great visibility on how much southern money came north and how significant it was. If we look at the big players the only really significant move was Pat Doherty’s Titanic Quarter. I know of BTLs here and there but the currency risk made it an unattractive punt of the wannabe landlord class. What we should also consider is how much bubble-feeding money went the other way: the Taggarts, the Jacksons, Laws, Fergal McAlinden – to name a few all spent big money south of the border.

    I think Nama’s influence on resi prices is quite limited – the main resi stuff they’ve been selling is Sam Thompson stuff and it’s been going quite slowly. Meanwhile Ulster, Danske and various sub-primers have been regularly selling stuff at auctions.

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  13. BluesJazz (profile) black spot says:

    I’ve just noticed newbuilds (3 bed semis) in the past 18 months in South Down (middle market) go visually from Bargain ‘£179, 450′ to ’128, 450′ (last ones remaining etc) to -last week- ‘£74, 250′. . Turnkey housing with all appliances. Few are biting.
    £70k for a turnkey newbuild semi in a good area seems to be the norm.
    For anything £100k plus you can get a 6 bedroom with 2 acres easy enough.
    Apartments in central Belfast are being sold to social housing for buttons or let fotr less than 500 a month .
    Go back to 1994 for realistic values.

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  14. Harry Flashman (profile) says:

    “Go back to 1994 for realistic values.”

    Those figures are quite shocking BluesJazz, the 3-bed semis seem to me to be a steal.

    It just goes to show there is no such thing as a bad profit. I had a nice 2-bed apartment in a good location in Derry, bought it for 50k in 1997, sold it seven years later for 85k, a pretty impressive return I thought only to discover I could have sold it for well over 100k. I kicked myself silly at the time.

    Glad I got out when I did.

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