In today's Sunday Buisness Post, Post David Cullen in Belfast reports, on the Property scene in Northern Ireland...
"North facing property crisis as house values take a hammering...
The deepening crisis in the North’s residential property market is highlighted by figures showing a near 19 per cent slump in values in the year to the end of June.
The survey, by Nationwide building society, also showed that prices had dropped by 9 per cent in the second quarter of this year - the steepest correction in property values recorded across Britain and the North.
The downturn comes on the back of an unusually sharp jump during 2006 and 2007, when prices grew by almost 80 per cent.
‘‘These increases were clearly not sustainable and left the market particularly vulnerable to external shocks, such as the financial downturn that began last August,” said Fionnuala Earley, chief economist of Nationwide. ‘‘We are now seeing the consequences of that excess vulnerability.”
The average price of a house in the North now stands at around £183,000 (€230,000) against around £215,000 (€270,000) a year ago.
Ulster Bank’s North economist, Richard Ramsey, said the rapid gains in house prices were unsustainable and that the subsequent correction had been accelerated by the credit crunch.
‘‘House prices appear to be returning back towards pre-boom levels, with a number of estate agents confirming that they are now valuing houses at 2006 prices,” he said.
‘‘While this represents a significant drop of over 25 per cent on last year’s peak, these falls must be put in context. The latest figures remain some 50 per cent above the level of two years ago and have more than doubled over the last five years.”
Property experts said that the North’s housing boom had been largely investor-driven and that this had helped to squeeze out the first-time buyer.
With fewer buyers in the market, hard-pressed developers were being forced to offer heavy discounts while adding full turnkey packages, paying stamp duty and legal costs, or subsidising mortgage payments for up to three years.
Some first-time buyers were being offered the chance to pay for 75 per cent now and the rest in several years’ time.
The volume of house sales has also plummeted. According to the latest University of Ulster quarterly house price index, produced in partnership with Bank of Ireland, just 896 transactions from almost 120 estate agents were registered between January and March, compared with 2,120 in the same period a year ago.
This was the lowest number of quarterly house sales recorded since the survey started in 1984.
‘‘The low level of housing transactions has seen mortgages fall in the first quarter of 2008 to their lowest level since the late 1970s,” said Ramsey.
‘‘Clearly, the ongoing credit crunch is making life more difficult for borrowers and lenders alike, and the trend in falling average house prices is expected to continue in 2008.”