Northern Ireland’s house prices languish in the doldrums

Which would you choose as your dream home – a bungalow in a suburban street in Lisburn, County Down or a villa with an ocean view in a hot climate?

It would seem according to the results of the latest local housing survey that a large majority of people in Northern Ireland might – given the choice – be inclined to opt for the bungalow in Lisburn as their dream home.

Research by the University of Ulster suggests that Lisburn currently has the highest property prices in the North and that bungalows have enjoyed the highest price jump of any property group this year.

The value of a typical bungalow has increased this year by 16.2 per cent to an average of £148,342,

According to the University of Ulster’s Quarterly House Price Index between April and June the average price of a home in Northern Ireland was £130,864. Six years ago the average house price in the North was £234,000.

The university's house price index, which is produced with Bank of Ireland and the Northern Ireland Housing Executive, illustrates just how the North is still struggling to cope with the fall out from a property crash after 16 consecutive years of price rises.

It may also help explain why one of Northern Ireland’s largest housing charities has revealed that it is “struggling” to cope with a record demand from local people for mortgage debt advice.

Latest figures from the Housing Rights Service show that between April and June of this year around 400 households contacted it to ask for help – a 26 per cent increase on the same time last year.

The charity estimates that over one third of mortgages taken out in the North since 2005 are currently in negative equity.

None of the major mortgage lenders including Santander, Halifax, Bank of Ireland, Ulster Bank, Nationwide, First Trust or Danske will for "commercial" reasons disclose the extent of negative equity across their portfolio in the North.

But the Housing Rights Service is adamant that based on its research Northern Ireland is in a much more “critical” position with regards to the number of mortgage holders whose homes are not worth what they originally paid for them.

Nicola McCrudden, policy manager with the charity said: “Northern Ireland suffers from a huge negative equity problem which affects around seventy five per cent of our clients.” What is worth remembering is that the ongoing slump in property prices is happening against the backdrop of some fairly unsettling developments on the overall debt front in the North.

According to Richard Ramsey, chief economist with Ulster Bank Northern Ireland, the North has had a surge in corporate insolvencies – although this is due to the fact that insolvencies have come off a rather low base.

"Northern Ireland's corporate insolvency rate (0.5 per cent), which is corporate insolvencies expressed as a proportion of the business base, remains below that of England Wales (0.6 per cent) and is on a par with Scotland (0.5 per cent)."

But recent personal insolvency figures show that even with five consecutive months of falling unemployment, signs of “financial strain” are obvious among local households.

Ramsey said 3,330 insolvencies have been recorded over the last four quarters to the end of quarter two 2013 while in the latest quarter, 894 individuals were either declared bankrupt or entered into either an individual voluntary arrangement or a debt relief order.

But add the vicious circle of a downward slump in house prices and mortgage debt to what is happening generally and it is not hard to work out why the Housing Rights Service is now warning about a “worrying upward trend of mortgage repossession actions”.

The charity believes that the level of home repossessions is much worse in the North than in any other part of the UK.

New figures released by the chancery division of the Northern Ireland High Court last week show the number of cases relating to mortgages in the North jumped to 1,958 during the first six months of this year.

The charity says the Northern Ireland needs to urgently tackle the growing problems of mortgage and debt and repossessions.

It believes the Northern Ireland Executive needs to get to work with mortgage lenders and also consider introducing other initiatives such as a mortgage debt relief fund or mortgage rescue scheme.

One important first step to helping the growing population of mortgage prisoners in the North is the plan by the Department for Social Development to set up a new working group this summer to “identify ways of preventing or mitigating the impact of repossessions”. But the question is how fast can it actually get up and running and will it make a real difference to the growing population of mortgage prisoners in the North now?