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Mortgage foreclosures surge in Northern Ireland

Belfast residents are in difficult position as a jump in distressed mortgages and surging unemployment play havoc with market

PUBLISHED : Wednesday, 05 June, 2013, 12:00am
UPDATED : Wednesday, 05 June, 2013, 4:40am

Belfast retail worker Chantal McCarthy never thought she would have to find a new home at the age of 57, but her husband lost his job as a builder three years ago and their finances have since spiralled downward.

"We couldn't keep up payments with the bank," said McCarthy, who is trading their three-bedroom house in a quiet suburb for a cheaper terraced one in Ardoyne, one of the city's toughest neighbourhoods.

"Now we've sold up and had to sell for the same price as the houses in the street that had been repossessed. But at least we'll be able to sleep at night."

It has been 15 years since a peace treaty that was designed to replace violence with prosperity, but Northern Ireland's financial troubles are deepening.

Foreclosure demands by mortgage lenders are rising at the fastest rate in the United Kingdom, as is unemployment in a region where the economy never managed to fully get over sectarian conflict and the demise of shipbuilding and other heavy industry.

Northern Ireland's Courts Service dealt with 1,008 distressed mortgage cases in the first quarter of this year, which was up 19 per cent from the same quarter last year.

In England and Wales, cases fell by 15 per cent, according to data from the Ministry of Justice. In Scotland, which publishes annual figures, they rose 7 per cent for last year.

"It's the shock to finances after the boom, the squeeze on incomes," said Richard Ramsey, chief economist at Ulster Bank, the bank with the most branches in Northern Ireland. "We are the weakest performing part of the United Kingdom."

McCarthy, who works in a textile outlet on an industrial park in the northern districts of Belfast, and her husband have been trying to avoid moving since his work dried up in 2010.

Burdened with credit-card debt, the couple decided to build a house on a plot attached to their home with the aim of selling it for a profit.

Instead, the construction work never started and they sold the land to pay their mortgage, she said.

Now they are preparing to move into their new house in Ardoyne, a former stronghold of the Irish Republican Army and the scene of some of Belfast's lingering sectarian rioting. Unemployment there now runs at about 13 per cent.

"I know what Ardoyne can be like, but I'm sick of all the constant worry about money," McCarthy said.

The issue for the province, which hosts the Group of Eight industrialised countries summit next month, is that growth in the economy was short-lived.

Between 2005 and 2008, house prices in Northern Ireland almost doubled, according to Ulster Bank, which is a unit of Royal Bank of Scotland.

By 2007, the surge saw it become the third most expensive region in Britain to buy a home, despite a history that had seen 3,500 people killed in the "Troubles" and a workforce that had an average annual salary of £22,169 (HK$262,560), 12 per cent below the British average.

"Northern Ireland's boom was telescoped into two or three years, that's what's unique about it," Ramsey said.

Prices went up as the IRA formally declared an end to its armed campaign for a united Ireland and as the economy of its closest neighbour, the Republic of Ireland, grew at the fastest pace in the euro region.

"It was a very, very busy time for us," said Desmond Turley, an estate agent in Belfast's Malone Road area, the city's wealthiest district. "It's a different picture now."

One house in nearby Malone Park recently changed hands for £758,000, Turley said. At the top of the market, it went for £3.6 million.

The peace agreement in 1998, which created a power-sharing assembly in Belfast between mainly Catholic republicans and predominantly Protestant unionists, followed a cease-fire by the IRA a year earlier.

In the decade to 2007, Northern Ireland's economy burgeoned by almost 70 per cent, according to data from the region's administration.

The growth, like in the Republic of Ireland, was partly driven by home-building and expansion in the retail industry and services such as call centres.

In Ireland, home prices quadrupled in the decade to 2007, before the bubble burst and the government was forced to rescue its banks and then follow Greece by seeking a bailout from international lenders.

In Northern Ireland, the aim was to develop an economy that had been hampered by violence and a decline in industries such as shipbuilding, a traditional mainstay in a city.

Since then, the efforts have been hobbled by the global financial crisis, the economic travails in Ireland and a drop in demand for exported goods.

House prices have fallen by 50 per cent over the past five years, while employers such as Seagate Technology, the world's largest computer disk-drive maker, and FG Wilson, a unit of construction- and mining equipment-maker Caterpillar, have cut worker numbers in the region.

The unemployment rate, while still officially about 8 per cent, is growing at the fastest pace in the UK, according to statistics from the Belfast-based Ministry for Enterprise.

Adding to the difficulties is an attempt by dissident republicans to reignite the province's conflict. They have killed two British soldiers and two policemen in the region since 2009, while street protests by pro-British loyalists this year caused disruptions in Belfast for more than two months.

Home prices in the province fell 0.9 per cent over the past year, according to data released in March by Nationwide Building Society.

That was the fourth-worst performance of the Britain's 13 regions and compares with an average gain of 0.2 per cent.

Ramsey estimates house prices in Northern Ireland have fallen 55 per cent since their peak and forecasts the decline will extend to around 60 per cent. He predicts unemployment will not peak until next year.

"I can't see repossessions not increasing," said Paddy Gray, a lecturer in housing at the University of Ulster. "It was a frenzy and people overstretched themselves. More and more people will find difficulty paying their mortgage."

While court judgments on foreclosures do not automatically lead to homes being seized, they grant the lender the power to do so if an arrangement with the debtor cannot be reached.

For McCarthy, forced to sell her family home in Sandyknowes, a quiet suburb in north Belfast, to avoid that outcome, it is the end of a three-year "nightmare". "Now we will have some peace in our lives," she said. "We will be able to take our kids out for a meal when we see them, instead of them having to pay for dinner."