High prices hit first-time buyers

By James Kerr
BBC Northern Ireland business editor

The rapid growth in house prices in Northern Ireland may be good news for some - but not for everyone.

First-time buyers are feeling the pinch

Experts in the field have growing concerns that first-time buyers are being priced out of the market.

Meanwhile, research BBC NI has carried out suggests that homeowners are now spending more of their income on their mortgages than at any point in the last 20 years.

Back in 1985 the average home cost £28,000 and with interest rates at a whopping 13%, the monthly repayment was around £275 on a 90% mortgage.

Spool forward to the spring of 2005 and while the house has soared in price to around £120,000 interest rates had dropped sharply, meaning that the £600 a month mortgage payment was proportionately similar to 20 years previously.

Usually an investor has got there before me, and a bidding war starts. They can simply go further than I can on my budget. Leeanne Whaley First-time buyer

However, skip forward another nine months to today, and that average price has gone up again, this time by more than 20%, with a similar increase in mortgage payments for anyone buying into the market.

Feeling the pinch worst are first-time buyers, who are often looking to purchase terraced houses where the increase was closer to 30%.

Agents dealing with this part of the market say that prices for these properties have been rising sharply since the latest figures came out.

Leeanne Whaley is a first-time buyer and says she has found her search a "frustrating experience".

"The asking price is now a very poor guide to what the property is going to make," she said.

"I've looked at 17 properties and the first thing I ask is if there are already any bids.

"Usually an investor has got there before me and a bidding war starts. They can simply go further than I can on my budget."

Leeanne is looking to buy in east Belfast, along with many other young professionals, and numerous investors.

We started to notice a shortage of properties in the autumn, but it is only since the new year that prices have really gone up, some by as much as 20% in a few weeks Christopher Pooler Estate agent

Agents agents such as Christopher Pooler of PoolerWatson.com says there is an unexplained shortage of properties coming onto the market, and that with relatively few houses being chased by an unusually high number of potential buyers, prices have gone up sharply.

"We started to notice a shortage of properties in the autumn, but it is only since the new year that prices have really gone up, some by as much as 20% in a few weeks," he said.

A lot has been made of the impact that investors are having; for them the attraction of a rising market is hard to go past.

Steve McGuinness is one such investor and also a letting agent acting for others.

"Pensions have been getting a bad press, shares may be coming back, but have not done that well for a long time, the bank is safe but gives a poor return," he said.

"Property has always been seen as a good investment, and more and more people are realising that."

Independent analysts such as Stanley McGreal at the University of Ulster say that province-wide the number of houses sold under £100,000 has dropped from 40% of the market to 25% in just a year.

"Fewer first time buyers are able to get into the market. This can create distortion as these are the second and third-time buyers of five and ten years hence," he said.

Of course, what would have a dramatic impact on the property market would be any sharp rise in interest rates - but there seems to be no immediate threat of that on the horizon.

However, it is not just mortgage repayments that are going up; add in rising rates, gas and electricity bills and it's not hard to see why people are feeling a squeeze on the family budget.