Belfast store clerk Chantal McCarthy never thought she would have to find a new home at the age of 57. That was before her husband lost his job as a builder three years ago and their finances spiraled downward from there.
“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 neighborhoods. “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.”
Fifteen years after a peace treaty that was designed to replace violence with prosperity, Northern Ireland’s financial troubles are deepening. Foreclosure demands by mortgage lenders are rising at the fastest rate in the U.K., as is unemployment in a region where the economy never managed to fully get over sectarian conflict and the demise of heavy industry.
Northern Ireland’s Courts Service dealt with 1,008 distressed mortgage cases in the first quarter of this year, a jump of 19 percent from a year earlier, figures from the judiciary show. In England and Wales, cases fell by 15 percent, according to data from the Ministry of Justice. In Scotland, which publishes annual figures, they rose 7 percent in 2012.
“It’s the shock to finances after the boom, the squeeze on incomes,” said Richard Ramsey, chief economist at Ulster Bank Ltd., the bank with the most branches in Northern Ireland, which remained part of the U.K. after the rest of Ireland won independence in 1922. “We are the weakest performing part of the U.K.”
McCarthy, who works in a textile outlet on an industrial park in north 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 take possession of 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 percent.
“I know what Ardoyne can be like,” McCarthy said in a phone interview. “But I’m sick of all the worry about money.”
The issue for the province, which hosts the Group of Eight industrialized 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, part of Royal Bank of Scotland Group Plc. (RBS) By 2007, the surge saw it become the third most expensive region in the U.K. 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 pounds ($33,575), 12 percent below the U.K. average.
“Northern Ireland’s boom was telescoped into two or three years, that’s what’s unique about it,” said Ramsey.
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 neighbor, the Republic of Ireland, grew at the fastest pace in the euro region as Europe’s “Celtic Tiger.”
“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 pounds, Turley said. Yet at the top of the market, it went for 3.6 million pounds, he said.
The Good Friday 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 percent, according to data from the region’s administration.
The growth, like in the Republic of Ireland, was partly driven by homebuilding and expansion in the retail industry and services such as call centers. In Ireland, home prices quadrupled in the decade through 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 hampered by violence and a decline in industries such as shipbuilding, a traditional mainstay in a city whose Harland and Wolff yards produced the Titanic.
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 percent over the past five years, while employers such as Seagate Technology Inc. (STX), the world’s largest disk-drive maker, and FG Wilson, a unit of construction- and mining equipment-maker Caterpillar Inc. (CAT), have cut workforces in the region.
Adding to the difficulties is an attempt by dissident republicans to re-ignite the province’s conflict. They have killed two British soldiers and two policemen in the region since 2009, while street protests by pro-U.K. loyalists this year caused disruptions in Belfast for more than two months.
Home prices in the province fell 0.9 percent over the past year, according to data released in March by Nationwide Building Society. That was the fourth-worst performance of the U.K.’s 13 regions and compares with an average gain of 0.2 percent. London, the most expensive region, had an increase of 4.6 percent in the period.
Ramsey at Ulster Bank estimates house prices in Northern Ireland have fallen 55 percent since their peak and forecasts the decline will extend to around 60 percent. He predicts unemployment won’t 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 don’t automatically lead to homes being seized, they grant the lender the power to do so if an arrangement with the debtor cannot be reached. The figures from the Scottish government in Edinburgh don’t separate out landlord evictions for renters from mortgage cases.
For McCarthy, forced to sell her family home in Sandyknowes, a quiet suburb in north Belfast, to avoid that outcome, it’s the end of a three-year long “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.”
To contact the reporter on this story: Colm Heatley in Belfast at firstname.lastname@example.org