Housing Slump Hits Northern Ireland Economy Harder Than Bombs
By Colm Heatley
July 31 (Bloomberg) -- Jim Kingham says the credit crunch is hurting his Belfast-area moving company more than the violence that ravaged Northern Ireland for 35 years.
Kingham has fired nine of his 12 workers at A1 Shortnotice, based in Newtownards, as house prices plunge and sales dry up.
``You can take me back to the days of the bombings,'' says Kingham, who has run A1 for 40 years. ``Business was better then. Five of my six lorries haven't left the yard for months.''
The credit-market rout is undermining the peace dividend for one of the U.K.'s poorest regions. Northern Ireland's economy is stalling as house prices, which surged as violence came to an end, fall at the fastest rate in the U.K. and building reaches a 12-year low.
``First-time buyers are now frozen out; the investors have packed up,'' says Alastair Adair, a professor at the University of Ulster in County Antrim who helps compile the province's main house-price index. ``It's a real problem for the economy.''
Northern Ireland's economy will grow 1 percent this year and next, less than half the rate in 2007, according to a forecast by Ulster Bank, a unit of Royal Bank of Scotland Group Plc.
The province had expected an economic revival following the restoration of a power-sharing government between Catholics and Protestants last year. The accord settled a conflict that claimed 3,500 lives during a period known as the Troubles.
Leading up to the deal, house prices rose at the fastest pace in Europe, data from the Royal Institute of Chartered Surveyors show. They climbed 79 percent in the two years ending in the second quarter of 2007, according to Nationwide Building Society, the U.K.'s biggest customer-owned lender.
``Properties would go on the market and the same day there was maybe 10 or 20 bids in,'' says Desmond Turley, managing director of Ulster Property Sales in Belfast. ``It was frenzied. Now it's different. The level of interest just isn't there.''
On average, U.K. house prices fell 4 percent in the second quarter from a year earlier, according to Nationwide. In Northern Ireland, prices plunged 19 percent.
The credit crunch has deterred local buyers and investors from south of the border, real estate agents say.
``The investors aren't around any more,'' says Stephen McCarron, who runs a real estate agency in Derry, in the northwest of the province. ``During the boom nothing surprised me, and 40 percent of property deals in the city were made by southern investors.''
McCarron says he sold 10 houses to a buyer from the Republic of Ireland in May 2007, after the man walked into his office with 1 million pounds ($2 million) to spend.
At the peak of the boom, a five-bedroom house on Alliance Avenue in Belfast sold for 800,000 pounds. The North Belfast thoroughfare had been dubbed ``Murder Mile'' because 40 people were killed on or near the road during the conflict.
Four years ago in Dunmore, in north Belfast, homebuyers lined up overnight to buy property just yards from a park split by a 25-foot-high corrugated iron wall erected to keep Protestants and Catholics apart, Turley says. Prices in the area fell 25 percent in the past 12 months.
In April, Belfast-based Northern Bank, owned by Danske Bank A/S, withdrew the 100 percent mortgages it had offered to borrowers in the province, following the lead of other banks.
Others raised lending rates, choking off demand for mortgages. While home loans fell 40 percent across the U.K. in the first five months of the year, they slid 60 percent in Northern Ireland, according to the London-based Council for Mortgage Lenders. That's helped send prices tumbling.
Maeve Egan bought a two-bedroom apartment in west Belfast for 130,000 pounds in 2006. Now it's worth 30 percent less, and she can't afford the 800-pound monthly mortgage payment after failing to find a roommate.
``I'm living in my mum's house and renting the flat out just to pay the mortgage,'' says Egan, adding that she's cut her spending on clothes and holidays. ``I can hardly afford to go out through the door because of it.''
Tom Gray, owner of Budget Travel in Belfast, says sales are down 12 percent this year. Car sales in the province have fallen 9 percent from last year, the biggest drop in the U.K., according to the Society of Motor Manufacturers and Traders Ltd.
``There is a risk that the property prices will slip a bit more,'' says Alan Bridle, economist at Bank of Ireland Plc. ``The associated business-service side has caught the chill as well.''
Back at A1, Jim Kingham is mulling packing up one last time.
``I don't think we'll continue that much longer,'' he says. ``Even during the Troubles it wasn't as hard as it is now.''