Confidence in Northern Ireland's housing market is unlikely to change as purse-strings are tightened by benefit cuts and lack of job security, experts have said.
Ulster Bank chief economist Richard Ramsey said rising interest rates in a few years’ time would also make mortgages more expensive and ultimately trigger steeper falls in house prices.
Mr Ramsey made his comments after a UK-wide survey by top lender Halifax showed the average UK house price fell by £6,000 in August, from £168,124 to £162,092.
But prices in Northern Ireland — where the average house costs £130,877 — stayed static in August, according to Mortgage Shop founder Siobhan McAleer.
She said mortgage applications had fallen by 20% in August — though approval ratings were up, with four out of five applications being approved.
Self-employed people face the biggest refusal rate, she said.
“The only transactions that are happening with first-time buyers are those supported by significant deposits from parents,” Ms McAleer said.
“The challenge for property buyers is that the lower the deposit the higher the associated interest rate, which is putting people off.”
She said interest-only mortgages were becoming a thing of the past, with repayment loans now the norm instead.
Ms McAleer added: “As a result, many people are seeing that it is cheaper to rent. They also understand that there is no expectation for house prices to rise so there is no urgency to buy.”
She said there would be no increase in mortgage lending until 2012 and estimated that 95% of first-time buyers in 2007 to 2008 would be in negative equity.
“I do think there is an acceptance by first-time buyers that they will have to sit it out for the next five to seven years before they can sell their property without making a loss.”
Mr Ramsey said the economic forecast was unlikely to shake potential buyers out of their inertia.
He said: “If you are facing doubts about the future of your job, the last thing on your mind will be buying a new house.
“In Northern Ireland, house prices have fallen by around 40% from their peak and with the public-sector cuts that are coming down the line, there will be all kinds of headwinds facing a house price recovery.”