BELFAST BRIEFING:Concern is growing that some developers will have difficulty paying off their loans, writes Francess McDonnell

THERE ARE few people who have reason to cheer the current gloomy economic outlook in Belfast.

But some of the patrons of one landmark bar in the city could be forgiven for raising their glasses to toast the slowdown in the economy.

The Rotterdam Bar in Belfast's Sailortown area had been earmarked for demolition as part of a new multi-million pound redevelopment scheme.

The 19th century bar, which according to local legend was once used as a holding cell for prisoners who were being deported to Australia, is a well-known and respected live music venue.

It has hosted musicians from every corner of the globe - even the likes of Bob Dylan, who is reputed to have played Mr Tambourine Man in the Rotterdam one night in the late 1960s.

Despite a concerted effort by its many fans to save the bar, its owners called time on the establishment and the doors of the Rotterdam closed - for what was thought to be the last time - in May.

Now, however, because of the downturn in the Belfast property market, its owners have been forced to shelve plans to develop 56 luxury apartments on the site, and the Rotterdam is once again back in business.

Although the stirrings of an economic recession may have saved one of Belfast's most historic bars it has also put the brakes on a number of multi-million pound commercial developments across the city.

According to Damien Mitchell, associate director with the commercial and residential estate agency Lisney, the Rotterdam is a prime example of what is now happening across Northern Ireland.

He says property developers generally - whether they are in the commercial or residential sector - are finding the current credit crunch climate very difficult.

"There is a price correction taking place in Northern Ireland at the moment. We experienced a substantial spike in prices, because Northern Ireland came off a very low base.

"Two years ago there was easy access to credit and a lack of supply of product in the market to buy. Everybody jumped on the property bandwagon - both commercial and residential.

"People were not content with owning just one house - they wanted three and maybe four in some instances - and they could access the finance to do that. Now, however, the situation has changed and some people are going to feel pain," Mitchell said.

He says the property market relies heavily on local banks' ability to lend money, but now that the banks are not in a position to offer finance as freely as they have in the past it is a completely different market.

"What we are seeing now is that although banks are still there to lend, they are lending at much higher rates than investors have been used to, and from an investor's point of view this is putting them off.

"There is an appetite for property deals in Northern Ireland, but the big question for everyone is trying to gauge when the market is going to bottom out - will it be the end of 2008 or the middle of 2009?" Mitchell added.

He says the cost of finance and the level of uncertainty about where the market will land has led to a sharp reduction in the number of property deals being closed.

There is also growing evidence both in the residential and commercial property sectors throughout the North that prices are being reduced to sell.

Lisney, for example, is offering a residential development site in Belfast - 0.43 acres, which has full planning permission for 45 apartments - at a "reduced" price of £1.5 million (€1.88 million).

It is estimated a site such as this could have fetched in the region of £2.5 million during the property boom.

Mitchell believes a real concern for the North is the number of property developers who could now run into difficulties paying off their loans to banks and institutions.

"Because of the nature of the business, some property developers are fairly high geared. The knock-on effect of the global credit crisis means that they may be experiencing a shift in the value of their assets, and the impact of this could become very clear when they next try to refinance their business.

"The mortgage market has in some cases collapsed - there is no end demand for certain properties and that is a big issue for Northern Ireland.

"It means that developers now have to go ahead and decide whether to build or not on some sites, or change their initial plans," said Mitchell.

He does not believe banks or financial institutions would be willing to pull the plug just yet on developers who are having trouble meeting their repayment schedules.

"The banks are very aware of the situation - they realise that they cannot take over, for example, a developer's portfolio and start selling it off themselves.

"For one thing, nobody is going to buy it because there are few cash buyers out there - and also it would just collapse the whole system."

There is no denying the credit crunch is a burning issue for many people in the North at the moment - whether they are simply having a pint at the Rotterdam or sitting in government in Stormont.

The North's First and Deputy First Ministers met with members of the local banks and financial institutions yesterday at Stormont Castle.

Peter Robinson and Martin McGuinness wanted to hear how the banks and other financial institutions could help tackle rising costs and help people get access to mortgages.

According to Robinson, the Executive remains "firmly committed to its top priority of growing a dynamic and innovative economy in Northern Ireland" - the question is where will it find the cash to do that.