[*House prices must fall to 2005 levels * (https://www.newsletter.co.uk/news/House-prices-must-fall-to.4070402.jp)
Published Date: 10 May 2008
By Staff reporter
HOUSE prices will have to fall to the levels of two years ago for the market to recover, an expert has warned.
Tom McClelland, of the Royal Society of Chartered Surveyors, was reacting to figures released yesterday which showed the number of house repossessions in Northern Ireland rose by 33 per cent in the first quarter of the year, from 566 to 754.
He said the current difficulties were the fallout from a market which was driven by hungry investors.
Mr McClelland said house prices, which rose significantly between 2000 and 2005, should have “cooled in 2005”.
“But what has happened is that there was even more of a surge in house prices ending up that between 2005 and 2007 house prices rose by 50 per cent when other inflationary measures were only running at three per cent a year, driven principally by investors and their belief that prices would only continue to rise,” he said.
He said fundamental measures such as the wage to house price ratio “got out of kilter” when interest rates rose and investors left the market.
“There had to be an adjustment and we are going through that period now,” he said.
Mr McClelland said that “sadly for some families that means there will be repossessions”, a problem facing people “who got into the market a bit too late”.
“When it (the market) rises it tends to rise too far and when the pendulum swings too far up it has to swing back to correct and usually it over-corrects so we’ve been in correction mode for about a year,” he said.
“The correction will be difficult but there was an unhealthy investment fever in property which was skewing the Northern Ireland economy.”
Stating that the Province’s social housing was limited and under “pressure”, Mr McClelland said new builds were also falling in number and being sold at “big reductions to achieve sales”.
“It is believed that for the market to recover, house prices will have to return to levels last seen in late 2005 early 2006, so goodbye to our 50 per cent rise.”
The Housing Rights Service, the leading specialist housing advice charity in Northern Ireland, last night called for more assistance for struggling homeowners.
Policy and communications manager Nicola McCrudden said: "What we are witnessing is fallout from the credit crunch and the impact is likely to be greatest on people living on the margins of affordability.
"We see this on a daily basis, one in four of the clients who approach us for help are under threat of losing their home because they can simply no longer afford to live there.
“When people do fall into arrears, safety nets – in terms of state support – are largely inadequate.”
Derek Alcorn, chief executive of the Citizens Advice Bureau, said they had seen a rise in house repossessions, and a “very clear” trend in all the banks “pulling up on their lending and tightening their credit”.