NI homeowners 'paper millionaires'

Every week brings new data on Northern Ireland's booming property market.

Homeowners, it seems, never tire of hearing how much their houses are worth.

There was fresh excitement last week when the Royal Institution of Chartered Surveyors (RICS) revealed that Northern Ireland house prices are rising faster than anywhere else in Europe - up a massive 36% in the past year.

This means that homeowners in Northern Ireland have built up huge equity in their properties.

In an admittedly conservative estimate published on Tuesday, the Northern Bank puts this at more than £58bn over the past 10 years.

The average homeowner has made just under £134,000 and many people have become paper millionaires.

The bank points out that these figures cover people with mortgages, not those who own their homes outright. They're even better off.

Investment

The "equity mountain" has encouraged an increasing number of owners to borrow against the value of their houses in order to buy investment property to rent out.

A study by the University of Ulster reveals that the private rental market in Northern Ireland has grown by 120% over the past 15 years.

But researchers suggest that the buy-to-let market may have reached its peak and that some small-scale landlords could fall victim to sudden changes in the economic conditions of the market.

The study found that many landlords were borrowing up to 75% of the property value, leaving them vulnerable to interest rate rises or periods of vacancy.

What this means is that investors could find themselves paying out more in mortgage repayments than they're recouping in rent.

University of Ulster lecturer Paddy Gray, who compiled the research, said: "There is evidence of increasing numbers of vacant properties in the private rented sector. By 2004 there were over 12,000 vacant properties."

Property experts say it's probably too late for small-scale investors to enter the buy-to-let market in Northern Ireland, and that is why hundreds of people are buying property abroad.

Bank of Ireland estimates that more than £2.5bn is flowing out of Northern Ireland into foreign property purchase every year.

And that's another conservative estimate.

RELATED INTERNET LINKS
Department for Regional Development
Northern Ireland Consumer Council
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