East Belfast Sectoral Study - Northern Ireland Housing Executive

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sector for at least the short-term. There was also evidence of some rental in the professional worker sector, with some cross movement from the South Belfast market though there were doubts as to whether there was a big enough transient workforce to fuel growth. Civil servants in government departments at Stormont and hospital staff in Dundonald were identified as potential targets for rental accommodation but otherwise the market was considered to be limited. Migrant workers were estimated to contribute somewhere between 10 to 20% of the market. 6.5 Due to the recent level of investor purchasers the supply of private rental property is seen to be high in East Belfast with the perception of good choice for tenants. It was considered that properties will not rent if they are over-priced or not of a good specification. 6.6 There was a perception that rents were too low: according to one agent the average rental for a terraced property is £450-500 per month whereas it should be at least £600 per month. According to another agent, rental levels in the terraced sector were seen to be too closely aligned to the DHSS tenant. A further agent indicated that rental levels varied between £350 and £1000 per month depending upon type and location of the property in East Belfast. 6.7 After allowing for rental income and outgoings (mortgage payment, fees, rates, repairs and other charges) estimates by one agent suggested that the average outlay by an investor is circa £150 per month. With property prices increasing at £500 per week 2 this was described by the agent “as a no brainer”. Another agent was of the opinion that the reform of rates and the likely increases to be borne next year by the property owner may curb the buy-to-let market in East Belfast as it is unlikely that the increase in rates will be passed to the tenant given the level of rental supply in the market. 6.8 There was agreement amongst all agents that investors are not covering return through rental income alone and that investors are banking upon taking the capital gain to achieve an overall high rate of return. The point was made by several agents that investors were paying price levels that simply could not be covered by current rental levels with the inference that capital growth was producing the return. 6.9 In terms of locations within East Belfast, it was felt that Cregagh will become a rental area and an extension of the South Belfast rental market in a rippling-out effect from the Ormeau-Ravenhill areas. There was the overall perception that Titanic Quarter should enhance the market though there was a concern about apartment schemes having a high vacancy level if the rental market is not there. 2 Bridle writing in the Northern Ireland Quarterly House Price Index Report No 85 46
7. Market imbalances 7.1 Market imbalance occurs whenever demand and supply are out of equilibrium. Economic theory shows that the price of a commodity increases when demand is high and supply is constrained. This is often a feature of housing markets as supply is in-elastic and cannot adjust to short-term increases in demand. Indeed, short-run supply issues are considered as being very difficult to address due to the lack of land and the time that it takes to getting planning permission granted. 7.2 The East Belfast market during the second quarter of 2006 is characterised by a combination of high demand and a supply-side which was not able to keep pace with demand. In accordance with the theory of markets, this imbalance is driving price levels upward. The imbalance is particularly apparent in the terraced market and to a lesser degree the semi-detached market. There was a feeling that to bring the local market back into balance there would have to be some major negative effect on the housing market eg a large interest rate hike or the buy-tolet/investor market collapsing/reducing substantially due to poor returns. 7.3 The current imbalance in the owner-occupied sector is demand-side driven, the consensus is that demand is up by a factor of two or three whereas supply, at best has only increased by a factor of 10% and according to some agents may either be static or down. Agents considered that the market could easily cope with a further 25-30% increase in supply. There was also the perception that owner-occupiers were not listing their properties until they saw a suitable property to purchase, thereby delaying the house-purchase chain. 7.4 Market imbalances were seen to be highly variable. For the East Belfast market the current imbalance in the owner-occupier sector due to high demand levels was contrasted with the private rental sector where supply was considered to be high and more than sufficient to meet demand in the market. Under these circumstances rental growth was seen to be sluggish. . 47
Page 2 and 3: TABLE OF CONTENTS 1.0 Introduction
Page 5 and 6: 2.0 Strategic Context 2.1 Backgroun
Page 7: exacerbating land and property pric
Page 10 and 11: interface around Short Strand/Bally
Page 12 and 13: proposals to create a network of Qu
Page 14 and 15: Knock and Orangefield Wards have th
Page 16 and 17: environment and crime and crime and
Page 18 and 19: area, 1653 in the Belfast City port
Page 20 and 21: years. The current affordability cr
Page 22 and 23: Most areas are experiencing increas
Page 24 and 25: the growing interest in buy to let
Page 26 and 27: 5.0 Private Sector Market Perspecti
Page 28 and 29: Property Type Average Price 2005 Qu
Page 30 and 31: continue in the longer term, the fa
Page 32 and 33: 32 July 2006
Page 34 and 35: 1. Introduction and approach to the
Page 36 and 37: changes to the education system in
Page 38 and 39: significant in the re-branding of S
Page 40 and 41: though one major agent with an exte
Page 42 and 43: that the current price thresholds f
Page 44 and 45: scheme. The scheme is attracting yo
Page 48 and 49: 8. Relationship of East Belfast mar
Page 50 and 51: 10. Conclusions 10.1 The overall co
Page 52 and 53: demand and keeping rental levels do
Page 54 and 55: Appendix 2 Northern Ireland Housing

East Belfast Sectoral Study - Northern Ireland Housing Executive

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