Page last updated at 14:07 GMT, Tuesday, 12 May 2009 15:07 UK

How the bubble burst in N Ireland

By Andrew Verity
Propertywatch, BBC Two

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Clare cannot move to her dream house before she sells her current property

Nowhere in the UK was there a boom like it. And nowhere has there been such a bust.

House prices in Northern Ireland tumbled by 40% last year. But that only partially deflated a bubble that had been inflating for five years. In 2006 alone, house prices had jumped by 48%, far more than any other part of the UK.

At what we now know to be the zenith of the house price bubble, in the autumn of 2007, a survey by Halifax Estate Agents identified the four towns where prices had risen fastest in the previous five years. All were in Northern Ireland.

Bewilderment

Apart from Newry, Londonderry and Lisburn, the fastest-rising house prices of all were in a county whose name had been associated for three decades with army watchtowers and the hard men of the IRA. Between 2002 and 2007 house prices in Armagh nearly trebled - up by 188%.

People in Northern Ireland watched in bewilderment as speculators from south of the border, fuelled by their own property bubble (now in collapse) poured money in, buying not to live in or even let out but to speculate - waiting for a few months for prices to appreciate so they could sell and take the profit.

The Giant's Causeway
Northern Ireland offered spectacular scenery and value for money

The theory behind the boom made sense at first. Prices had been artificially low before peace broke out - staying at 1970s levels.

At the turn of the millennium, as the boom rippled out from the Southwest to the rest of the UK, Northern Ireland had a good story to tell.

Beautiful open countryside, uncrowded roads, an increasingly confident sense of prosperity - and value-for-money houses.

Peace dividend?

Was this the peace dividend made concrete and turned into tangible wealth?

The only people who are going to sell in this market are those who are prepared to be truly ruthless
Leo Mcilroy, estate agent, Ballymena

Well, not exactly. Because that is the trouble with viewing housing as an index of your wealth. The bricks and mortar will not make people rich until they are sold.

And in Northern Ireland's now frozen property market, that is no longer so easy.

Leo Mcilroy, an estate agent in Ballymena, says: "In 2007 you barely had time to get a For Sale board up before the property sold. The houses were flying off our books. And the prices were getting silly.

"Now we have to do our job, go out and sell and match buyers with sellers."

The excessive boom has now gone in reverse.

Frozen market

With prices plummeting, buyers are afraid of buying a house that is going to fall in value and wipe out their deposit.

Transactions are down to the point where, for months now, the market has been frozen.

"You have to be honest. If you're trying to sell quickly, look at a realistic price, long term, what happened before is no longer achievable. People right now just won't accept their property is not worth as much as they thought," Mr Mcilroy add.

Many homeowners in Northern Ireland who saw their house prices rocket formed plans around tapping their new-found wealth.

PROPERTYWATCH MAP
Mood map

Clare Gibson, a retired businesswoman from Cushendall on the north coast of Northern Ireland, is desperate for the frozen market to thaw.

She needs to sell her detached four-bedroom home, located in beautiful countryside within a short drive of the Giant's Causeway and boasting views of the sea and even a stream running down the back of her garden.

She put it on the market 18 months ago, at the peak of the house price boom, for £350,000.

"I thought that the pattern would continue and I would have sold so quickly. A house nearby sold for a fantastic price. The market's just died since then," she says.

Rare commodity

She has taken £80,000 off the price to try and shift it. But no buyers have come forward.

Clare has already committed to buy a newly-built property 16 miles away, in Ballycastle, and has already put down a deposit.

The house, built to her own specifications, is priced at £350,000 - more than she is now selling for.

And being retired, there are limits to what she can borrow.

Her builder, unburdened by debts and therefore in no pressing need to sell, is unwilling to cut his price because he wants to cover his costs and take a reasonable profit.

Clare now hopes that by letting as many people as possible know she is selling, her house might find a buyer.

But without further price cuts, something she feels unable to do, she is going to need some luck.

Price cuts

And that is the central problem that keeps the market frozen. Some buyers are unable, and others unwilling, to cut to prices low enough to attract the buyers, who are very aware they are a rare commodity here.

Sellers and buyers are caught in a stand-off. Neither party moves, so nothing happens.

"The only people who are going to sell in this market are those who are prepared to be truly ruthless. You cut your price by enough and it will go. But then you can also get a lot off the next property you buy," Mr Mcilroy says.

But Clare still is not giving up on achieving the price she has set her sights on.

Propertywatch, a new series on property prices and the downturn, is broadcast from Monday to Thursday, 11-14 May at 2000 BST on BBC Two.



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