The Impact Of Negative Equity On Our Economy: Comment
04. 09. 2015
Tom Cardwell, Director at Negative Equity NI, sat down with Ulster Business recently to discuss the impact of negative equity on the growth of the Northern Ireland economy. The latest edition of Ulster Business is on sale now.Despite the recent uplift in property prices, there are still a lot of people who are trapped in negative equity. We estimate that 41% of homeowners in Northern Ireland are currently in negative equity and our figures show that the average level of negative equity per residential property is £68,000.The fact that these people can't sell their property, combined with the slowdown in house building over the last five years, has led to a shortage of houses in the local market. While this shortage has pushed prices up over the last few months, we should all be wary that the market isn't stable. Until the shortage in housing has been resolved, or the problem of negative equity has been solved, the housing market won't normalise which has huge implications for the economy. A stable housing market is one of the cornerstones of a secure economy and Northern Ireland is still some way from achieving this.Unfortunately it's not going to be an easy problem to solve. The Government has already tried and failed with its 'wet blanket' approach to negative equity with the release of the Housing Repossessions Taskforce report and recommendations, which simply don't go far enough to help those in need.In my opinion, there are two ways to solve the negative equity crisis; greater flexibility from lenders and people who are in trouble seeking help.Although house prices are on the rise, we're still seeing hundreds of homeowners approach the team at Negative Equity NI for help every week. We have around 400 live client cases at the moment - that's 400 homeowners who are trapped in negative equity and want to find a way out. There are many more who have yet to seek that help, leaving them stuck in a property they can't sell, which has a negative impact on the housing market and the wider economy.There are other issues on the horizon too. Homeowners who took out 10 year mortgages in 2005 and 2006 will soon see their deals come to an end. With rumoured interest rate rises on the way and the smaller number of mortgage products available on the market now compared with a decade ago, these homeowners could find their repayment sums going through the roof.This will put a lot of homeowners in financial difficulty, potentially leading to repossessions, people not being able to move and more pressure put on an increasingly strained housing market.The upward trajectory of the Northern Ireland economy is dependant on a stable, successful housing market. While the uplift in prices is welcome and provides some light relief for the market, we still have a long way to go before house sales in Northern Ireland can be described as stable.
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