Posted on Wednesday 9 July 2014 by Ulster Business
PwC says high levels of negative equity and low levels of disposable income is weighing on housing prices
It will take 10 years before property prices in Northern Ireland housing market recovers to the heights reached at the peak of the boom in 2007, according to business advisors PwC.
The business advisors argue that high rates of negative equity and the lowest levels of disposable income levels across the UK will be factors which continue to drag on the property market, one which remains 50% below the August 2007 peak.
“Interest rates are expected to rise during 2015 and this, combined with our proportionally low disposable income and high percentage of negative equity, will represent a substantial call on future workforce earnings,” economist Dr Esmond Birney said.
“Collectively all these factors have contributed to relatively low levels of demand and only as the legacy of the property bubble and the accompanying debt overhang are worked out of the system will we see increasing domestic demand and accelerated recovery.
But while the forecast isn’t overly rosy, prices are still heading north.
Its UK Economic Outlook expects housing prices here to grow by 2.2% in 2014 - double that of last year – and will accelerate by 4.7% in 2015 and by 5.9% in 2016.
Still, Northern Ireland’s property market looks set to lag well behind the rest of the UK.
Average prices in Scotland are only 4.7% below their peak, in Wales 3.5% below while in London property prices are currently 32% above the 2007 peak.
That’s in contrast with other UK regions where most, if not all of fall has been recovered; average prices in Scotland are only 4.7% below their peak and in Wales the gap is 3.5%. On the other hand, London property prices are currently 32% above the pre-recession peak, with the South East just over 7% ahead.
“Growing levels of business investment, a steady recovery in the housing market and a reduction in the housing debt will contribute to accelerating recovery, but the impact of these factors means that recovery will be slower to emerge and will be more prolonged than elsewhere.”
PwC said it expects interest rates to be kept on hold until late 2014 or early 2015 before rising to 4% by 2020.