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How Belfast’s young economy is set to become its gold mine
October 5, 2016Article by Paul Avery
The Financial Times reported last year that £3.5 billion worth of gold lurks seductively under the Ulster soil – potentially one of the biggest gold mines in the world. While that windfall is unlikely to materialise before 2020, its contribution to the Northern Irish economy will almost certainly be eclipsed by the decision of the devolved Executive to drop the country’s corporate tax rate from 20% to 12.5% in 2018. That pot of tax free gold is expected to create upwards of 30,000 new jobs (Belfast City).
It has been a rollercoaster ride for UK business since the announcement last year. In one of George Osborne’s most flamboyant post-referendum flailings, the former Chancellor sought to match Northern Ireland’s cut with a trim of his own that would bring the British rate down to 15% (a move his exasperated continental counterparts decried as a wacky ‘race to the bottom’). However, in this Monday’s speech his successor Philip Hammond revised the new rate to a more moderate 17%, thereby securing Northern Ireland’s comparatively business-friendly future.
Belfast’s spritely economy
With this latest twist in mind, the time feels ripe for an update on Belfast’s property market. Prices in the capital are largely driven by its young, feisty economy, which is sure to benefit from the competitive advantage the impending rate cut will bring.
With 44% of its 280,000 population under 30 and better educated than the UK as a whole, a vibrant knowledge economy is bubbling up in Belfast (Titanic Quarter). Enterprise Research has found that 9.7% of Belfast startups reached £1m turnover in their first three years, roundly walloping London’s 7.9%. The city is a national hub for fintech, cyber security and TV production, and its thriving financial services sector employs around 33,000 people (Financial Times). Huge regeneration projects like the trendy waterfront Titanic Quarter are the focal points of this scene and facilitate its expansion.
Property values finally perking up
Initially sluggish to bounce back from the crash, the recovery of Northern Irish property is now officially in full-swing: Belfast prices were up a hearty 9.8% in the year to Q2 2016 (NISRA). The capital’s agile economy and 45,000-strong student population are also putting upward pressure on rents, which rose by 5% in 2015 (The Telegraph). That said, fluctuations (most recently referendum-induced ones) persist. The latest figures reflecting our screwball summer suggest Belfast prices rose just 0.3% in August – more or less in line with the national hiccup.
But with values still 46% down on the pre-crisis market peak and sturdy fundamentals underpinning the recovery, the overall trend in Northern Ireland is indisputably up. In the ten years to 2024 the population is projected to grow by 7.3% (NISRA). Demand for housing will remain voracious for some time, with the Housing Executive projecting a need of 11,200 new dwellings every year to 2025 (though in 2015 less than half that many were built). The bottom line is forecast capital growth of 6% per annum for the next three years (Savills, Feb 2016).