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Ulster property recovery may take ‘decade’

Houses in Belfast

Houses in Belfast

Northern Ireland property prices could take a decade to recover, experts said.

Sales are still only worth around half their August 2007 peak, according to business consultants PriceWaterhouseCoopers (PwC).

The firm warned the depressed property market combined with the lowest levels of disposable income in the UK and the high proportion of households in negative equity will contribute to a slower economic recovery than in other regions.

PwC’s Northern Ireland chief economist Dr Esmond Birnie said: “Our nominal property price projections for the UK and its regions suggest that it could be at least 2024 before Northern Ireland property prices return to their pre-crisis levels.

“Interest rates are expected to rise during 2015 and this, combined with our proportionately low disposable income and high percentage of negative equity, will represent a substantial call on future workforce earnings.

“Collectively all these factors have contributed to relatively low levels of demand and only as the legacy of the property bubble and the accompanying debt overhang are worked out of the system will we see increasing domestic demand and accelerated recovery.”

PwC estimates the Northern Ireland economy grew by 1.1% last year and while this is expected to double to 2.2% this year, it represents the lowest regional growth in the UK - which is expected to rise as a whole by 3%.

The organisation predicted a steady rise in average Northern Ireland property prices, up by 4.7% this year and as much as 5.9% in 2016.

Mr Birnie added: “Collectively, growing levels of business investment, a steady recovery in the housing market and a reduction in the housing debt will contribute to accelerating recovery, but the impact of these factors means that recovery will be slower to emerge and will be more prolonged than elsewhere.”

He expected the Bank of England interest rate to increase gradually from late this year or early next year to around 4% by 2020. The real cost to borrowers of servicing mortgages could be 8%.

Earlier this year it was reported that future rises in interest rates will hit Northern Ireland homeowners hardest.

According to a London think-tank, about one in six people with a mortgage in Northern Ireland are in danger of their repayments becoming unaffordable by 2018.

 

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