Northern Ireland’s vulnerability to sub prime…

George Bridge’s article on the regional vulnerability of the UK housing market to the vagaries of the credit crunch and how that it is likely to play into the hands of the Tories over the next few years. Ominously, in a regional of Norhtern Ireland, the risk seems to run from medium to high risk. According to a follow-up in today’s Daily Mail, Gerry Adams’ west Belfast constituency is the tenth most vulnerable in the UK (with 59.4% of households at risk). Mark Durkan’s Foyle constituency not looking good either.

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  • Frustrated Democrat

    Don’t think the Tories will get too many votes in West Belfast! However Luton Lady sounds better than Andersonstown Aggie.

  • DC

    Written by a former Conservative campaigner until 2007 hardly unbiased.

    The Irish News carried the story too on the front page today and it does make for interesting reading. It’s clearly depressing to witness just what has happened in that homes have been turned into speculative economic units fuelled by credit linked to market performance in some instances.

    The Tories are not smelling sweet on the issue of better regulation of global economics and offering up serious policy proposals to curb consumer spending before disaster. They did a bit of it with a silly website – it was clearly insincere lipservice but it will likely be used in part as successful propaganda soon:
    http://news.bbc.co.uk/1/hi/uk_politics/6177190.stm

    While Gordon Brown is at fault for not realising the absurdity of house prices rising ridiculously out of sync with retail prices index some alarms bells should definitely have gone off back in 2005-06 period. It will be interesting to see how much of the blame will rest with private finance, regulatory bodies and government.

    It would be wise to remember that the Tories themselves were culpable for a direct policy decision to go into EMU / exchange rate mechanism, whereas with Labour there are serious globalised factors behind this; however, Gordon will have to share the blame for his own lack of foresight and largely unsympathetic tax rises in an uncertain economic environment.

    It looks as though largess private sector financial practices will provide the rope that brings down Labour if it really bottoms out, but it’s still despicable that the Tories are looking with whetted appetite to take advantage of people’s rock-bottom misery and life altering misfortune for those seriously affected.

    This is nasty yet rather successful politics at work, play on the psychological factors in people’s minds that someone is to blame other than those who signed up to mortgages and spent well beyond their capacity off credit cards underwritten by international finance. The Tories want to capitalise on accumulated personal tragedies to get a foot-up into power. Hitler did that too, that’s why the Tories still repulse me. Personal consumer spending is a large and corrosive factor behind this, i.e. having no savings or money to pay back what such individuals actually spent. So rather than look to ourselves for bad money management we need someone to blame and out comes the Tory propaganda rushing in to wipe clean personal guilty consciences with full blame and guilt on the Government. While not without some blame is surely not worthy of it all.

  • willis

    I can understand your reluctance to soil your hands with a link to the Daily Mail.

    http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=556769&in_page_id=1770

    There, all done

    What is going on in Plymouth?

  • willis

    A Godwin in 2

  • latcheeco

    Almost 60% private homeownership in WB. The place is a triumph of capitalism 🙂

  • IJP

    5 comments on this, 195 on all-Ireland football teams… sometimes you think NI people would deserve everything a credit crash could hit them with…

    This is all extremely troubling. In the early ’90s, NI was largely sheltered from the earthquake that hit Britain, but you can’t help but feel we’ll be the epicentre this time. I’m actually a little surprised the Mail deems most of NI “average” risk, rather than worse. However, the three constituencies which are deemed worse are the three most deprived – no surprise there.

    Let’s see what politicians (egged on by the media and well orchestrated middle-class lobbies) actually did to alleviate this entirely foreseeable situation:
    – slap a rates cap on which applies only to those able to afford to live in the most expensive houses,
    – define a “housing crisis” as middle-class students being unable to afford their own homes rather than working young people being unable to find any home, and
    – pay total lip-service to any form of “sustainability” while allowing ongoing free-for-all developments allowing speculative buys based on land alone.

    It’s really quite pathetic – we demand all this public spending for the “vulnerable in our society”, but actually it just goes on filling our pockets so that, when it comes to action, we can just allow a bonkers free-for-all from which the well-educated emerge enriched, and the worse-off emerge in another mountain of debt and despair.

    On the whole, we don’t care about those worse off than ourselves at all. It’s about time we stopped kidding ourselves that we do.

  • alan

    Grief the media has a lot to answer for in there reporting of house prices. 24 months ago it was reporting soaring house prices, houses as investments now its doom and gloom. Balance? Second rate reporting (not journalism) carried out by reporters who haven’t done the research or know the subject. Cut and paste reporting.

    Houses prices surged in 2006 – 2007 by 55% what we are seeing now is a needed correction. The ‘crash’ of 1989 saw house prices fall 30%. Prices leveled off for 3 years and then began to grow again. In NI we already have seen a correction. Now is the time to get out there and start picking up the bargains, particularly in areas that you thoughts had gone out of your reach…

    ps I’m not an estate agent

  • The Raven

    Alan – good point. I was in with an estate agent I know only yesterday, and he said the very same thing that a developer mate of mine (not prone to grabbing trespassers by the throat, I might add) did.

    They were both complaining that the media make things twice as bad as they actually are with sensationalist claims that have little bearing on the issue.

    The estate agent also said he fully expected things to get “a little bit better” when summer comes round. I’m not sure if he was referring to traditional patterns in his business, or the improvement in the weather!

  • runciter

    ps I’m not an estate agent

    Estate agents aren’t the only people who bought into this Ponzi scheme – sorry, ‘housing boom’.

  • aquifer

    This was not speculation on housing, it was speculation on land values driven by new lending and underpinned by a slow and reactive planning system.

    We need to turn some green fields into housing developments now, because our increasing population will need this eventually anyhow. NIMBYs lie down.

    The good news is that some local people have a lot more capital than when this started, which they could apply to something productive if they are suitably incentivised.

    The bad news is that many will lose their homes and that the bankers will not lose anything very much. The other bad news is that our politicians are also playing ‘never never never’ when it comes to levying rational rates and taxes on land and empty dwellings.

    Culturally we need to get over this house ownership thing. Many other forms of investment are better when saving for pensions, or when creating jobs. Building a mountain of external debt out of bricks and mortar was never a sustainable economic development strategy.

  • IJP

    aquifer

    This was not speculation on housing, it was speculation on land values driven by new lending and underpinned by a slow and reactive planning system.

    Right on the button, not for the first time.

  • Big Bird

    IJP,

    Is that the official Alliance party line??

  • runciter

    We need to turn some green fields into housing developments now, because our increasing population will need this eventually anyhow.

    Dropping prices are clear evidence that supply is exceeding demand at this point. Encouraging more development at this time would not only not work (who’s going to invest money in this daft scheme?) but would be economic insanity.

  • IJP

    Big Bird

    I’m speaking for myself, as this is primarily a social issue – but the reference to “slow and unresponsive planning system” and my opposition to a populist Executive is representative of the Alliance Party position, yes!

    My point is that aquifer‘s analysis of the problem is spot on, which in itself is a welcome innovation from the rubbish you read both in the media and government press statements.

    I don’t necessarily accept aquifer‘s solution, actually, but that’s a separate point. Before you can solve a problem, you first need to identify what the problem is – even there, the Executive is proving horribly deficient.

  • DC

    So it is based on land values, but what are land values if not a base for house speculation aided by credit driven on by banks playing in on the big game until point break. I mean, why should the middle classes have three holidays a year when they can pay it off to banks and mortgage lenders who fan the flames with commission chasing lending limits.

    The principle was speculation affecting vital interests in maintaining a happy life, which may still be running along nicely for those who benefited but what of those dislodged?

    While in the background to all this people can rack up 3 credit cards at once to the tune of around £6k that eats up income not rising in line with credit card APR. With negative equity in place the nice option of borrowing is curbed if not culled.

    What is the solution to this problem for those in too deep especially now generous credit is finished and perhaps chances of more moderately fixed repayment schemes.

  • DC

    IJP, I read on the Alliance Party website that Anna Lo was encouraging more money to be put into co-ownership schemes after the yearly limit had been spent; is this not encouraging both people and government to throw good money after bad in terms of an overheated market awaiting correction? Or was this populist lip-service itself á la Alliance?

    It was clearly ridiculous that houses in paramilitary riven estates, swelteringly close to July bonfire placements, had managed to reach the heady heights of £170k. Even the locals knew something somewhere had gone financially awry.

  • IJP

    DC

    Not in the context, no.

    Firstly, again, my remarks are about society primarily – people seem determined to own houses. I’ve never seen why personally, but that being the case, the Executive had to react. One of its better ideas was to promote the co-ownership route, as that at least limits the credit outstanding.

    Secondly, having made an announcement to this effect, the Executive then failed to realize it required money! It was in that context that the Alliance Party demanded the Executive meet its own promises.

  • Chris from Brooklyn

    Anybody interested in buying a bridge?

  • runciter

    One of its better ideas was to promote the co-ownership route, as that at least limits the credit outstanding.

    Investing public money in a bubble is not a good idea.

    First time buyers would be better off renting until the market sorts itself out.

  • DC

    A loss is still a loss. I think it is too simplistic just to say land values it was a rather complex pattern of borrowing and lending going on by both business people and other individual speculators from the financial sector.

    The reality of the complexity is borne out by the fact that at the worst point of the credit crunch parts of the financial system weren’t able to establish just where the money had gone to and to whom and into what! Then flash-bang, it all became illiquid.

    It is important people can live somewhere and take a sense of place by doing so otherwise you end up with higher crime rates associated with transient living and being able to turn the place over while passing through. South Belfast in some parts has trends associated to that form of in-out living.

  • Greenflag

    ‘people seem determined to own houses. I’ve never seen why personally,’

    It’s human nature and in Ireland particularly there are ‘historical’ reasons for the high rate of home ownership. IIRC some 85% ‘own’ their own homes . There is an historical antipathy to paying ‘rent’ which imo is almost genetic .

    The ‘present’ crisis has been brought about by a mix of factors everything from developer greed -get rich quick merchants – immigration – poor financial regulations-sub prime lending practices etc etc . The same has happened /is happening in the USA and in the Republic.

    Despite what the building societies and banks have been preaching for decades your home is not an investment. You have to live somewhere . It’s the place you live , hopefully own outright or soon will, and with luck may be able to pass it on to heirs or family etc etc .

    A second home is an investment and thus as with all investments let the buyer beware .

  • IJP

    runciter

    I agree completely, as should be evident from the above.

    However, a lot of people seemed intent on this “bad idea” – co-ownership was a good route to necessary damage limitation, in my view.

    Greenflag

    Good post.

    I’ve always been uncomfortable morally with the idea of people investing and trading in “homes”. Investing and trading in “property”, of course, is a different matter – but make sure your “home” doesn’t depend on it!