IT’S 2005 and an abundance of houses are emerging from the ground at a rate of knots right across Northern Ireland - some 4,400 in the second quarter of that year to be exact. But with a financial crisis just around the corner, these days were numbered.
The number of houses being built in Northern Ireland peaked in that three-month period 14 years ago, but steadily declined from 2007 for a decade, right up until the end of 2017.
Late 2017 recorded a slight uplift in the number of houses being built and this continued throughout 2018 reaching 2,600 in quarter two.
While still a long way off the pre-crash figures, this growth is encouraging but values are still at least 25 per cent less than they were at the peak, unlike Dublin and London. Despite the uncertainty surrounding Brexit, the residential property market in Northern Ireland remains robust.
Driving growth is the perception among developers that demand for housing is increasing.
On the buyer side this has been fuelled by greater mortgage finance availability and stability in the workplace resulting in steady price rises. First time buyer demand in particular is strengthening, all be it with today’s buyer profile being more a mix of thirty-somethings wanting a home to bring up families, rather than twenty-somethings looking for an early foot on the property ladder as an investment.
Independent Lisney research has revealed that whilst land values plummeted at the time of the financial crash, they have showed signs of recovery in recent times.
Developers have successfully secured funding from alternative sources in the form of private equity, as an example. Senior bank debt is becoming available from main stream funders, primarily for experienced developers who have sites with planning which is a promising change.
Throughout difficult times developers have shown creativity in their approach to land acquisition, securing positions by way of joint ventures and site fine scenarios as opposed to traditional outright purchasing. In comparison to other locations land values locally still remain relatively low.
That said, there is certainly competitive tension in the market place.
With restricted volumes of land being declared ‘For Sale’, it goes without saying that any interesting propositions coming to market receive significant levels of interest. The most keenly contested opportunities being those that are ‘ready to go’ with planning approval in place, but ‘zoned’ lands and strategic plots are also under the microscope.
In order to create a vibrant 24 hour economy, Belfast City Council, through its ‘Belfast Agenda’ and wider City Deal, has set a target of growing the number of city centre dwellers and job numbers.
The first steps of this campaign have indeed been taken with the development of several purpose-built student accommodation blocks in the city centre, in addition to a number of apartment schemes, and planning approval has been secured for the first purpose built ‘Buy to Rent’ scheme close to the new Ulster University campus. All of this activity will undoubtedly stimulate demand for city centre development opportunities.
Critical to the supply of development opportunities locally is the attitude of the planning departments, a function now controlled by the 11 councils in Northern Ireland. While delivering local development plans is expected to gather momentum in 2019, it will be interesting to see how lands will be released to enable future development.
Despite uncertainty surrounding Brexit and a perception that material price rises are inevitable, we can see healthy demand for development opportunities. At this pivotal time, the need for taking professional advice is paramount.
:: David McNellis is director at Belfast-based commercial property agency Lisney, which works on behalf of many of the north's most significant investors and developers as well as major retailers and businesses.
