Recessions and Opportunity: 2008 Financial Crisis & Investment in 2017

This dissertation investigates the 2008 financial crisis to identify investment opportunities, focusing on residential property in Northern Ireland, specifically Londonderry/Derry. It analyzes historical recessions and the 2008 crisis to determine patterns and develop a strategic business model. The research employs an empirical strategy with a phenomenological orientation, utilizing secondary quantitative data from various sources, including government publications and academic journals. The analysis includes descriptive statistics in the form of charts and graphs to demonstrate trends. The findings support a business strategy of investing in residential property in Londonderry/Derry, which is considered a promising market due to slower property value increases compared to larger cities. The research also considers alternative investments like shares, bonds, and precious metals, alongside political and economic factors such as interest rates and tax legislation. The study acknowledges the risks associated with investment and proposes strategies to mitigate these risks, offering valuable insights for investors seeking high returns.

Recessions and Opportunity:
The 2008 Financial Crisis Revisited – What Are
The Business Investment Opportunities in 2017?
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Dissertation Declaration
Statement of Originality and Authenticity
I confirm that the dissertation I am submitting is an original and authentic
piece of work compiled by myself that satisfies the university rules and regulations
with respect to Plagiarism and Collusion. I further confirm that I have fully referenced
and acknowledged all material incorporated as secondary resources in accordance
with the Harvard system.
I also clarify that I have taken a copy of the dissertation, which I will retain
until after the Board of Examiners have published the results, and which I will make
available on request of pursuance of any appropriate aspect of the making and
modernisation of the work within the university regulations.
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Acknowledgement
I would like to acknowledge the help of my family which has given me much
support. I also want to acknowledge the help of my rental manager and my accountant
for business advice.
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Abstract
Purpose - Motivation for the project was to be able to integrate elements of
the program and study a topic in depth. The purpose of the research was to examine
previous recessions including the 2008 Financial Crises to identify patterns and
investment business opportunities in 2017.
Design/Methodology/Approach- This research uses an empirical strategy with
a phenomenological orientation and an inductive approach. Literature regarding
previous recessions was examined and compared to the 2008 Financial Crisis which
was critically analysed to determine business opportunities. Secondary quantitative
data was collected from government publications, government agencies, academic
journals/publications, trade associations, internet based databases, university based
databases, syndicate based databases, business press, media companies, internet,
TV/radio, local private sources and personal networking.
Secondary quantitative data was analysed in the form of descriptive statistics
in the form of area charts, bar charts, line graphs, map charts and area graphs to
demonstrate trends. Macro environmental factors, including regional markets,
services and alternative investments were considered. The methodology was
analytical, with a critical assessment of collected secondary information and data to
develop a theory and strategic business model for which the risks, strengths and
weaknesses were examined.
Findings - The research supports a business strategy of investment in
residential property in Northern Ireland specifically Londonderry/Derry. Properties
remain between 50-70% of peak 2007 values therefore would be expected to increase
significantly in value in the next decade. Expected rental and capital gain yields in
2017 are likely to be greater than alternative investments such as shares, bonds or
cash deposit accounts.
Londonderry/Derry has been identified as an especially good market as
property values in this area have been slower to increase in value than in the larger
capital cities such as Dublin and Belfast. There are relatively more repossessed
properties available in this city which can be purchased below market value.
Moreover, estate agency fees and performance are more competitive in this city at
10% plus vat of rent. Furthermore, social tenants rent unfurnished properties and
rental yields of 8-10% can still be achieved in 2017. Risks or threats such as interest
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rate increases, government tax legislation regarding buy to let mortgages can be
mitigated by buying a limited number of properties mortgage free.
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Contents
Page
Title Page 1
Dissertation Declaration 2
Acknowledgement 3
Abstract 4-5
Contents 7-8
List of Figures 9-10
List of Tables 11
List of Abbreviations 12
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Table of Contents
CHAPTER 1: INTRODUCTION................................................................................13
1.1 Background of the study....................................................................................13
1.2 Aim.....................................................................................................................13
1.3 Overview and relevance of past literature..........................................................13
1.4 Objectives...........................................................................................................14
1.5 Methodology Overview.....................................................................................14
1.6 Scope..................................................................................................................14
1.7 Structure of the Report.......................................................................................15
1.8 Conclusion..........................................................................................................15
CHAPTER 2: LITERATURE REVIEW.....................................................................16
2.1 Introduction........................................................................................................16
2.2 Definition of Recession and Financial Crisis.....................................................16
2.2.1 Recession.....................................................................................................16
2.2.2 Depression...................................................................................................16
2.2.3 Financial Crisis............................................................................................16
2.2.4 Challenges in The Application of Definitions............................................17
2.3 Historical USA Recessions............................................................................17
2.4 Historical UK Recessions..................................................................................22
2.5 Historical Irish Recessions.................................................................................27
2.6 2008 Financial Crisis USA.................................................................................30
2.7 2008 Financial Crisis UK...................................................................................31
2.8 2008 Financial Crisis Republic Of Ireland.........................................................34
2.9 Mortgage Lending And The 2008 Financial Crisis.......................................36
2.9 Conclusion..........................................................................................................38
CHAPTER 3: RESEARCH METHODOLOGY.........................................................40
3.1 Introduction........................................................................................................40
3.2 Research Philosophy..........................................................................................41
3.2.1 Positivism research philosophy...................................................................42
3.2.2 Interpretivism research philosophy.............................................................42
3.3 Research approach.............................................................................................43
3.3.1 Deductive research approach......................................................................43
3.3.2 Inductive research approach........................................................................44
3.4 Research type: Quantitative and qualitative.......................................................45
3.4.1 Quantitative research...................................................................................45
3.4.2 Qualitative research.....................................................................................45
3.5 Data collection...................................................................................................46
3.5.1 Primary data................................................................................................46
3.5.2 Secondary data............................................................................................46
3.6 Data analysis......................................................................................................47
3.7 Reliability and Validity of Data.........................................................................49
3.8 Ethical Issues......................................................................................................50
3.9 Limitation of the study.......................................................................................50
3.10 Conclusions......................................................................................................51
CHAPTER 4: DATA ANALYSIS...............................................................................52
4.1 Introduction........................................................................................................52
4.2 Results................................................................................................................52
4.2.1 UK Property Prices.....................................................................................52
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4.2.2 Regional Property Prices........................................................................56
4.2.3 Northern Ireland Property Market..........................................................58
4.2.4 UK Housing Tenure....................................................................................60
4.2.5 Republic Of Ireland Property Market.........................................................63
4.2.6 Repossessions..............................................................................................65
4.2.7 Interest Rates...............................................................................................70
4.2.8 Stock Market Shares versus Property.........................................................73
4.2.9 Precious Metals...........................................................................................82
CHAPTER 5: DISCUSSION.......................................................................................84
5.1 Introduction........................................................................................................84
5.2 Residential Property...........................................................................................84
5.2.1 UK Residential Property Prices..................................................................84
5.2.1.1 Introduction..............................................................................................84
5.2.1.2 Long Term Trends.............................................................................84
5.2.1.3 Factors Affecting Housing Market...........................................................84
5.2.1.4 1990s Property Crash...............................................................................85
5.2.1.5 2008 Property Crash.................................................................................85
5.2.1.6 Regional Variations..................................................................................86
5.2.1.7 Northern Ireland.......................................................................................86
5.2.1.8 Housing Tenure........................................................................................88
5.2.2 Republic Of Ireland Property Prices...............................................................88
5.2.3 Property Repossessions...................................................................................90
5.2.4 Northern Ireland Buy To Let Market.............................................................91
5.2.4.1 Tenure......................................................................................................91
5.2.4.2 Rental Incomes.........................................................................................92
5.2.4.3 Estate Agent Fees.............................................................................92
5.2.4.4 Londonderry/Derry................................................................................92
5.3 Alternative Investment Opportunities................................................................93
5.3.1 Commercial Property..................................................................................93
5.3.2 Cash Deposit Accounts and Interest Rates..................................................94
5.3.3 Comparison Of Stock Market and Shares versus Property.........................94
5.3.4 Bonds and Gilts......................................................................................96
5.3.5 Precious Metals......................................................................................97
5.4 Political Factors..................................................................................................97
5.4.1 UK Tax Reforms.........................................................................................97
5.4.2 Republic Of Ireland Taxation......................................................................97
5.4.3 Limited Company........................................................................................98
5.4.4 Brexit...........................................................................................................98
5.4.5 Political Party Changes.................................................................................100
CHAPTER 6: CONCLUSION................................................................................101
CHAPTER 7: PERSONAL DEVELOPMENT/STATEMENT................................104
REFERENCES...........................................................................................................105
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LIST OF FIGURES
Figure 1 Line Graphs To Demonstrate Unemployment Change In Major Recessions25
Figure 2 Line Graph To Demonstrate UK Unemployment Rate From 1972-2012.....26
Figure 3 Line Graph To Demonstrate Recovery Rates From Different UK Recessions
......................................................................................................................................27
Figure 4Line Graph To Demonstrate Unemployment In Ireland 1960-2017..............34
Figure 5Line Graph To Demonstrate Government Debt And Interest 1982-2017......35
Figure 6 Bar Chart and Line Graph To Demonstrate USA Subprime Volume and
Share 1994-2007..........................................................................................................37
Figure 7 Chart To Demonstrate Layers of the Business Environment........................46
Figure 8 Area Graph To Demonstrate UK House Prices Since 1952..........................49
Figure 9 Area Graph To Demonstrate UK House Price % Change Growth 1993-2015
......................................................................................................................................50
Figure 10Line Graph To Demonstrate Real UK House Prices 1975-2015..................50
Figure 11 Line Graph To Demonstrate UK Average House Price To Earnings Ratio
1954-2014....................................................................................................................51
Figure 12 Line Graph To Demonstrate UK Average House Price To Earnings Ratio
1986-2016....................................................................................................................52
Figure 13 Line Graph To Demonstrate Consumer Price Index CPI and Rent CPI
2005-2016....................................................................................................................52
Figure 14Bar Chart To Demonstrate UK Regional House Prices in 2015..................53
Figure 15 Line Graphs To Compare London and Northern Ireland House Prices From
2005-2015....................................................................................................................56
Figure 16 Line Graphs To Compare London and Northern Ireland House Prices From
2005-2015....................................................................................................................56
Figure 17 Line Graphs To Compare Northern Ireland, Republic of Ireland and UK
Residential Property Prices 2005-2015........................................................................57
Figure 18 Bar Chart To Demonstrate UK Trends in Tenure From 1918 to 2014........58
Figure 19 Line Graphs To Demonstrate Proportion Of Local Authority Dwellings In
The Different Countries Of The UK 1991-2007..........................................................59
Figure 20 Line Graphs To Demonstrate UK Home Ownership By Age Group..........59
Figure 21 Line Graphs To Demonstrate Trends in UK House Building 1949-2013...60
Figure 22 Area Chart To Demonstrate House Prices in Republic Of Ireland 1975-2016
......................................................................................................................................61
Figure 23 Bar Chart To Demonstrate House Building In Republic Of Ireland 1991-
2015..............................................................................................................................61
Figure 24 Line Graphs To Demonstrate Ratio Of House Prices To Income and House
Completions in Republic Of Ireland 1985-2015..........................................................62
Figure 25 Line Graphs To Demonstrate USA Delinquency and Foreclosure Rates
1990-2016....................................................................................................................62
Figure 26 Bar Chart To Demonstrate Number of UK Repossessions 1988-2012.......63
Figure 27 Map Chart To Demonstrate Northern Ireland Repossessions By Council
District 2005-2011.......................................................................................................65
Figure 28Line Graph To Demonstrate Number Of Repossessions in Republic Of
Ireland 2012-2015........................................................................................................67
Figure 29 Line Graph To Demonstrate Bank Of England Base Rate 1985-2017........68
Figure 30 Line Graphs To Demonstrate UK Base, Bank and Mortgage Interest Rates
1980-2014....................................................................................................................68
Figure 31 Line Graphs To Demonstrate Base Rates and Inflation in UK 2003-2017. 69
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Figure 32 Line Graph To Demonstrate ECB European Central Bank Interest Rates
1999-2017....................................................................................................................69
Figure 33 Line Graphs To Demonstrate Irish Interest Rates For Housing Loans 2003-
2016..............................................................................................................................70
Figure 34 Line Graph To Demonstrate US House Prices Since 1900.........................71
Figure 35 Line Graph To Demonstrate Inflation Adjusted US House Prices Since
1900..............................................................................................................................72
Figure 36 Line Graphs To Demonstrate USA Federal Housing Finance Agency House
Price Changes 1991-2015............................................................................................73
Figure 37Line Graphs To Demonstrate US Housing vs Stock Market Appreciation
1900-2010....................................................................................................................74
Figure 38 Bar Chart To Demonstrate Components Of 50 Year US Stock Market
Return 1920-1960.........................................................................................................75
Figure 39 Line Graph To Demonstrate Long Term Trend FTSE All Share 1920-2013
......................................................................................................................................75
Figure 40 Line Graph To Demonstrate Growth In The UK FTSE All Share 1946-2013
......................................................................................................................................76
Figure 41 Line Graph To Demonstrate Growth In The UK FTSE 100 Index 1984-
2013..............................................................................................................................76
Figure 42 Line Graphs To Demonstrate Real Growth In The UK FTSE 100 Index
1988-2013....................................................................................................................77
Figure 43 Line Graphs To Demonstrate Appreciation In UK Property and Stock
Market 1985-2015........................................................................................................78
Figure 44 Line Graph To Demonstrate UK FTSE PE Price to Earnings Ratio 1993-
2017..............................................................................................................................79
Figure 45 Line Graphs To Demonstrate Comparison Between UK Stock Market
(FTSE100), US Stock Market (S&P 500) and Gold 1984-2015..................................79
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LIST OF TABLES
Table 1 To Show Historical USA Business Cycles and Recessions Since 1882.........18
Table 2 To Show The Main Recessions Affecting The UK........................................22
Table 3 To Show Relative Income Per Capita of European Countries........................29
Table 4 Summary of Major UK Tax Changes Post Crisis...........................................32
Table 5 Summaries Key Forces That Influence Business in the Macro-environment.46
Table 6 To Demonstrate UK Regional Changes In House Prices In 2008 Recession. 54
Table 7 Line Graphs To Demonstrate Regional House Price To Earnings Ratios 2000-
2015..............................................................................................................................55
Table 8 To Demonstrate Number Of UK Buy To Let and Owner Occupied
Repossessions 2008-2016............................................................................................63
Table 9 To Demonstrate Northern Ireland Property Repossessions Completed By
Council District 2007-2016..........................................................................................65
Table 10 To Compare UK Share and Property Return 1985-2014..............................77
Table 11 To Compare UK Share and Property Return 2000-2014..............................78
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LIST OF ABBREVIATIONS
CAPE Cyclical Adjusted Price to Earnings Ratio
CPI Consumer Price Index
DIS Deferred Interest Scheme
DUP Democratic Unionist Party
ERM European Exchange Rate Mechanism
FDIC Federal Deposit Insurance Corporation
Fed Federal Reserve System
FICO score Fair, Isaac and Company
FOMC Federal Open Market Committee
FSCS Financial Services Compensation Scheme
GDP Gross Domestic Profit
HMMS Homeowner Mortgages Support System
HMO House of Multiple Occupancy
IMF International Monetary Fund
ISA Individual Savings Account
LTV Loan to value ratio
LVR Loan to value ratio
MARP Mortgage Arrears Resolution Process
MBS Mortgage Backed Securities
MPC Monetary Policy Committee
MSCI Morgan Stanley Capital International
NBER National Bureau Of Economic Research
OECD Organisation For Economic Co-operation and Development
RIC Royal Irish Constabulary
RGDP Real Gross Domestic Product
P/E Price- Earnings ratio
PRSI Pay Associated Social Insurance
UK United Kingdom
US United States
USA United States of America
USC Universal Social Charge
WTO World Trade Organisation
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