Northern Ireland’s big bubble is burst..

A UK nationwide survey of house prices in the Guardian reveals the size of NI’s burst bubble.

After two years of massive growth, a correction in Northern Ireland was on the cards in 2008, and it came when prices dropped by a staggering 34.2% over the year, according to Nationwide…Realistically one might expect Northern Ireland to remain the worst affected region in 2009, given the especially severe overshoot of house prices relative to earnings in the province during the boom years.”

What is the impact of this on the local economy ?

Update. A mixed picture for the crucial Christmas season reported today, with Debenham’s and John Lewis doing well overall but M&S about to cut 1,00 jobs. But is the Bel Tel’s story too negative? I would say not, but some in business would say yes. According to exchanges over at the local branch of the Institute of Director’s new blog NI Crunchtalk, the news is not all bad. Busness’s messages is: beware of excessive gloom!

Tim McKane

In reality a lot of families have more disposable income than last year, and are buying in a market of reduced prices almost across the board. Lower interest rates and lower fuel prices which are both impacting on retail prices, and the competition levels on the High Street further creating a shoppers market – are being stalled by he continuous news of potential catastrophe.

John McMullan

I do however think that it should be made clear when data is UK wide or only England and Wales. We can and do ‘buck’ national trends, for a series of reasons which may include 1/3 of jobs being public sector and a further 1/3 being underpinned by public sector spend, that if correct will have a dampening effect but not something to be complacent about, obviously. I do think we in NI have a particular and acute problem with falling housing prices…

  • It was Sammy Mc Nally what done it

    Talking of Norn Iron house prices in a UK context without reference to the ROI is clearly a nonsense – a bit like looking at retail sales in Newry and trying to work out which British economic factors are at play.

  • edward

    Have a freind works at the Adams Clothes she says 6 stores are closing

  • Cahal

    “At the start of the year the average house price in the region was £224,816; by the end of the year it was £147,833.”

    £147,833 for the average house in norn iron? Knock another 40 grand off that and you are approaching reality.

  • Sammy

    The Thing is Cathal-nobody is knocking the 40 grand off. I have my house priced to sell and have an offer on which I have been unable to accept due to people expecting to get 2007 prices for thiers. Just look at propertynews.com and have a laugh at some of the prices. Some people are taking the piss

  • Jean Baudrillard

    It’s a bit laughable to think NI will buck the trend when markets across the entire globe are being battered.

    Ok – so in the short term we are cushioned by the big public sector here. But surely, after 2010, when the government needs to start clawing back its £1 trillion spending deficit, the public sector here and elsewhere will be bled dry?

    Surely, it’s irresponsible to encourage local people to spend now? We need to start saving and paying off our mortgages before our lovely public sector jobs disappear forever.

  • Big Bucks

    Anyone with even a modicum of common sense must have known that the housing market locally was unsustainable.

    I sold two houses, one near the top and one at the top of the market, and just could not believe what the buyers were willing to pay. Given that I already separately owned my home I was awash with cash.

    Now the market has dropped I’ve bought two similar houses for less than the sale price of one I sold and its now the sellers who are biting my hand off.

    I just love capitalism!

  • Congal Claen

    If you bought at the top of the market you’ve lost more than 34.2% as the market peaked the previous summer. Imagine you were a southern investor who paid with a Euro mortgage. Double whammy with sterling down about a quarter as well!!!

    Say you bought a 200k house last year. That’d be about 300k Euro mortgage at the time. Now the house is only worth about 132k Stg or about 145k Euro. Over 50% drop in a year!!! Wild! And on borrowed money!!!

    Things are going to be hairy for a while!

  • The Raven

    Oh don’t y’all just love the smell of doom that lingers around this site….

    I’m dashing off somewhere else so I have to make these points brief:

    1 Ok, so I had just posted on another thread – things looking shaky over at Perfecseal (not for credit crunch reasons), the rumour mill is rife in the North West about Seagate (no, the OTHER Seagate), DuPont/Invista, FG Wilson down in Larne, and a number of others.

    2 Let’s NOT count of the “lovely” public sector jobs going too far. It costs government far too much to give out the handshakes. The community sector, however, will be hit harder than the public sector, for very obvious funding reasons.

    3 I just wanted to impart two separate examples that I encountered this very day, where successful businesses were being given the shaft by the banks, rather than an economy downturn:

    One small trader – a specialist in his trade – running a small one-man-show, very lucratively for the past 20 years. After considerable investment in a new workshop, he has dipped into a 4k working overdraft. Despite a full workbook for the next year, he’s just had his overdraft pulled. Why? No reason was given other than “Head Office says so”.

    The second is a manufacturing business – second year of trading, full order book for the next 18 months, and yet their working overdraft has been pulled by the bank. Cash flow inhibited, they are having difficulty fulfilling their orders and keeping 12 workers on the go. Why? “Head office says so”.

    My point is this. Our First and Deputy First “ministers” had the GALL to parade banking chief execs before Christmas in front of the cameras after, presumably, a lovely lunch, and stand with them as they mouthed platitudes along the lines of “we are doing everything we can to support local business’ cashflow”.

    Frankly, they lied. And those two feckless muppets had the temerity to publicise the fact. These are two examples. I have had ten more in the past two weeks alone of banks f**king their customers over.

    For those who are interested the cases above are both the same bank. I happen to be with them too. I for one am pulling my account with them tomorrow. It’s a small and petty move. But I will feel all the better for it.

    Politicians in Northern Ireland “helping the economy”? Don’t make me fucking laugh.

    And the housing thing? Great. Perhaps now we’ll start treating houses as homes, the way my parents and grandparents did, rather than assets.

  • Tomas

    Just heard today of more examples of The Ravens point. Two of the overdraft facility being pulled and one of a very , very, long discussion about a loan repayment demand out of the blue.
    When the manager was told that he was sending a faultless, profitable business to the wall and the staff onto the dole his reply was:
    ” You don’t understand. You have got our money and we will tell you when we want it back”
    Charming.
    I hope that this particular loathsome individual and his cronies soon learn what it’s like to lose what little respect they might once have had from their community.
    Cuddling up to the “ministers” spewing platitudes just shows that they can add “morally bankrupt” to their bottom line.

  • Bemused

    Raven and Thomas – please name the banks concerned (you’re not doing anything illegal or perilous in naming them).

  • frustrated democrat

    I’m not an employee or shareholder of HSBC but they are still open for good businesses and they are the 2nd biggest in the world.

    Worth a try for some of the businesses above.

  • tim

    ‘And the housing thing? Great. Perhaps now we’ll start treating houses as homes, the way my parents and grandparents did, rather than assets.’

    Well said Raven.

    So many stories of greedy shites getting shafted over the last six months. Why should we, as taxpayers bail out those who failed to see what was coming. Ritchie should stop saving these guys, they have already got rid of their workforces – plumbers, joiners, brickies etc… their only interest is self preservation of their own wealth.

    They serve no purpose.

    The Curzon apartments on the Ormeau Road being a prime example. Margaret Ritchie would be better locating cheap and readily available brown field sites to build homes, rather than allowing a fatcat developer to survive.

    My home has diminished in value by 35% over the last year, will anyone give ME the full asking price of twelve months ago?

  • Comrade Stalin

    Raven, I don’t mean to be a wanker, and I’m certainly not about defending the banks, but how could the business be a sound one if it needs to rely on an overdraft ? How can a firm which has 12 employees not have cash on hand ? They should have enough in the bank to at least pay everyone’s wages for a month, and their suppliers will be on 30 day terms .. so where does the o/d come in ?

    If a loan has been outstanding for a while, the bank has the right to recall it whenever it wants and a properly run business will be set up to deal with that. I appreciate that these banking tactics will kill struggling startup small businesses, but you guys are telling me that these are established, sound businesses. It doesn’t sound like they are to me. A sound business is one which doesn’t have any debt.

    The real joke here is certain people, and that group of people includes Gordon Brown, telling us that the banks have to lend in order to help the economy restart again. This is so nonsensical that it isn’t true. The problems that we are having are because the banks lent too much in the first place and are having to write off loans that can’t be repaid. No; the real medicine is going to be much more painful than that. Businesses which are fundamentally rubbish – hello Woolworths, hello Adam, hello Zavvi – are going to have the rug pulled out from them. Lending their money will only delay and indeed worsen the inevitable.

    Another note, in my personal experience the local banks do not have a clue about service, and they lag behind the big UK banks in terms of things like internet-based account servicing and so on. They pay rip off rates of interest and some of them even have “plus” current accounts that they charge you for the privilege of maintaining. I moved to Cahoot five years ago and have never looked back. Screw that.

  • Tomas

    Bemused.

    B of I was the one causing grief as I heard it.

    Comrade S

    I see you point and as I am no business man I really cannot dispute it. However my thinking is that credit and access to it is a vital part of the modern company.
    None of the examples I mentioned were in diffs and none had ever been late in repayment , in default of terms or whatever.

    Haulage firms , plant hire outfits, agricultural contractors and the like are bound to need credit to purchase big expensive kit.

    Likewise overdrafts for when the unexpected expense crops up. Big expensive kit’s engine goes bang. Quick repair paid out of overdraft and kit back doing job. Firm gets paid and gets account back in the black.

    If credit is a vital part of business today then the arbitary removal of same is a long way from “we are doing everything we can to support local business’ cashflow”.

    I do not, never have and am very unlikely ever to run a business so I am ready to be corrected.

  • frustrated democrat

    CS

    ‘A sound business is one which doesn’t have any debt’.

    You make it obvious you know nothing about business and how it operates. If that was universally true there would be no banks required few businesses in operation and few new ones coming into being.

  • edward

    CS
    A sound business is one which doesn’t have any debt

    You have obviously never operated a business of any size or merit.

    Most non retail businesses suffer a lag between when a product is sold and when it is paid for and we rely on over drafts to pay our daily operating expenses until our invoices are paid. I can not speak for the businesses detailed above but for my plant hire company we expect a payment lag of 60 days and far too often see a lag of 90 or 120 days. I would have to close down tomorrow if my bank pulled my overdraft even though my books show that I should be able to cover the over draft 3 times over.

    Especially when you are expanding credit is a god send, my revenues are up 35% over last year and I would simply be dead in the water with out an overdraft

  • slug

    “A sound business is one which doesn’t have any debt ”

    A completely wrong remark showing you have not studied finance. A business needs debt to make profitable investments. Not everything can be financed from retained earnings.

  • The Raven

    Comrade Stalin – I understand why you make that remark about a business “needing debt”, so to speak. And you are not being a wanker. It’s a common misconception.

    It wasn’t until I had worked with some small businesses that I understood why the overdraft was always in place.

    Tomas pretty much hits the nail on the head – the unexpected expense, the lag in payment, perhaps giving thirty days terms becomes sixty days etc.

    My first example is pretty much that – the one man bands are sometimes hand-to-mouth, and despite having some savings, an expansion can take you into the red for what will (hopefully) be a short time. All these people mentioned have had the carpets pulled from under them.

    The short-sightedness of the bank I am referring to, is staggering, and I truly hope it comes back to bite them in the arse.

    Bemused, I was tempted to name and shame. Indeed, I had typed the name of the bank, but I wouldn’t make it “live” unless I was absolutely sure it wouldn’t get this site – or indeed me!! – into trouble.

  • Harry Flashman

    Unless you’re a market trader who pays cash upfront for his goods and then goes out on to the street and sells them and doesn’t buy any more stock until he’s got rid of the last lot then of course you need credit.

    How do you pay for a new piece of equipment or plant or van? Wait until you’ve saved enough up and then pay cash? Of course not, successful companies use overdrafts all the time, if they didn’t we wouldn’t need banks would we?

  • Greenflag

    comrade stalin ,

    ‘A sound business is one which doesn’t have any debt. ‘

    The there is’nt a ‘sound business’ on the planet. All the way up the feeding line the loans get bigger . Companies need working capital for expansion , mergers , capital plant investment, and in order to grow quickly these financial needs are ‘borrowed’ . New ‘ share ‘ capital is also created but that is a ‘sophisticated ‘ way of borrowing as dividends will be expected .

    Have to agree with Harry Cashman on this one even if it goes against the grain 🙂

  • kensei

    CS

    Not a good day for you.

    The real joke here is certain people, and that group of people includes Gordon Brown, telling us that the banks have to lend in order to help the economy restart again. This is so nonsensical that it isn’t true. The problems that we are having are because the banks lent too much in the first place and are having to write off loans that can’t be repaid.

    Peston on why banks probably need to lend more: http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/01/british_banks_have_to_lend_mor.html

    We certainly need to move to an economy a bit less focused on debt. But once again, over the medium to long term. Please xamine what the ratio of debt to GDP wa sin the US after WW2, and what it was after the end of the 1950s. Having credit lines cut sharply in a short term contraction is one of the triggers for the whole thing in the first place. Further cutting credit lines and everyone paying off debts quickly will make things worse. This is the paradox of thrift I mentioned in my earlier post.

  • Greenflag

    Raven ,

    ‘The short-sightedness of the bank I am referring to, is staggering’

    Why staggering ? As the bankers and financial services fraudsters of Wall St/London etc were skimming or scheming away billions of dollars from taxpayers the reply most gave when they were confronted by questions as to the ‘staggering ‘ short sightedness of their excessive greed and how could they not see that it would all end in a mess , was IBGBT 🙁

    Which acronym stands for ‘I’ll Be Gone By Then ‘

    ‘ I truly hope it comes back to bite them in the arse. ‘

    Some hope . The only language these institutions listen to is that of boycott if even . People are going to have to stop trusting banking instituions and large corporations as to the making ‘ethical ‘ decisions . One of the reasons we have or are supposed to have ‘government ‘ is the fact that banking and business generally if left to itself to make it’s own rules for ethical behaviour -won’t .

    Sadly there is a case to be made for banks to reduce credit for struggling smaller businesses in this kind of economy . The rationale is that many of these businesses will not survive and credit or loans will not be repaid . In addition many of these loans are backed by collateral -usually property or capital plant . Banks at the moment are ‘terrified’ of taking on any more ‘property ‘ given a depreciating market .

    Cash is king now or assets which can be readily turned into cash . Which is why the ‘banks ‘ are holding on to as much cash as they can and there is a credit crunch .

    Keeping the head down sounds like a plan 🙂

  • frustrated democrat

    I was taking to a senior regional manager in a multi national bank today, and he is telling me their loan book in the UK is falling everyday as companies pay off loans and reduce overdrafts as they do not invest and reduce stock and debtors.

    They have a £5 billion pot of funds to lend to UK businesses but can’t find any companies that they think are good enough to loan it to.

    This seems to fly in the face of the banks not lending out money to good companies, maybe the government needs to rethink its plans.

  • Reader

    frustrated democrat: This seems to fly in the face of the banks not lending out money to good companies, maybe the government needs to rethink its plans.
    More likely the banks can’t work out what a good company actually looks like, now the boom times and easy money are over. The banks that learn fast will do better than those that don’t. They won’t make any money sitting on piles of cash