House prices rise by 6%

Economists and bankers said the strong performance of a limited number of detached houses, average price £311,000, pushed the average house price in the area up to £158,276.

This bucked the widespread trend elsewhere in Northern Ireland where - by and large - house prices dropped significantly.

The latest quarterly University of Ulster House Price Index, produced in partnership with Bank of Ireland and the Northern Ireland Housing Executive, shows that in Londonderry and Strabane the average house is now selling for £158,276 - a 6 per cent increase on this time last year.

The increase of £10,000 is the second consecutive quarterly rise in Londonderry and Strabane although smaller than the £30,000 spike experienced last autumn.

In neighbouring Coleraine/Limavady/North Coast region the overall average price of £159,908 was down 2.3 per cent over the year, with evidence that the rate of annual decline is slowing.

Some property types fell, such as semi-detached houses down 24.7 per cent to £140,950, whereas detached houses went up by 26.6 per cent to £216,250.

The average house price in Northern Ireland fell by 7.7 per cent last year but showed signs of stabilising in the final quarter with a weighted increase of 0.1 per cent, according to the latest University of Ulster Quarterly House Prince Index.

The authors of the report - Professor Alastair Adair, Professor Stanley McGreal and Dr David McIlhatton - said: “The second half of 2010 has been a difficult period for the housing market in Northern Ireland, contrasting with the tentative signs of recovery in the first half of the year.

“It seems that the prospects for the UK economy, local fears of public sector cuts and possible contagion effects from the Irish economy may have dented confidence in the local market and that the severe weather conditions may have impacted on sales volumes in the final quarter.”

The survey report said lower prices and reduced sales suggested the housing market continued to lack momentum.

However, a number of agents in the Belfast area and east of Northern Ireland expressed greater confidence in the quarter.

Alan Bridle, UK Economist, Bank of Ireland, said: “ This survey confirms that 2010 was not a year of housing recovery in Northern Ireland and the market faces into further headwinds in the next 12 months, both on the demand and supply sides - household incomes are falling in real terms and interest rates are likely to rise while, in reality, funding and regulatory pressures across the UK market will mean little change in the pattern of mortgage activity in the short-term. Overall, 2011 may be the year when the local market bottoms out.”

The survey indicated that the market is becoming increasingly lower priced with 29 per cent of properties selling at or below £100,000.

“In comparison, at the peak of the housing boom, less than 10 per cent of properties went for below £150,000 – which, said the authors, indicated a potentially more affordable housing market.

The Housing Executive’s Head of Research, Joe Frey, said: “It is important not to lose sight of the positive side to the huge drop in prices that we have seen since 2007.

“The ongoing cost of servicing a mortgage is now much more affordable for first-time buyers and investors alike. The key challenge for both policy makers and lenders is to restore confidence in the market, and in particular facilitate a more relaxed lending regime where the size of deposits is not such an insurmountable hurdle”.