Average house prices in Northern Ireland fell by almost 8 per cent last year.

The average cost of a house was £149,795 (€178,000), according to a University of Ulster (UU) survey. The number of sales also fell.

Cold weather affected activity around Christmas although the market showed signs of stabilising towards the end of the year.

One of the UU survey authors, Professor Alastair Adair, said: “The second half of 2010 has been a difficult period for the housing market in Northern Ireland, contrasting with the tentative signs of recovery in the first half of the year.

“It seems that the prospects for the UK economy, local fears of public sector cuts and possible contagion effects from the Irish economy may have dented confidence in the local market and that the severe weather conditions may have impacted on sales volumes in the final quarter.”

A total of 110 estate agents were surveyed about activity late last year for the UU, Bank of Ireland and Housing Executive Quarterly House Price Index. Average prices fell by 7.7 per cent last year but showed signs of stabilising in the final quarter.

The report said lower prices and reduced sales suggested the housing market continued to lack momentum, a sentiment supported by anecdotal evidence from estate agents throughout Northern Ireland.

However, several agents in the Belfast area and east of Northern Ireland expressed greater confidence in the quarter suggesting a regional variation supported by the quarterly price movement.

UK economist at Bank of Ireland Alan Bridle said the survey confirms that 2010 was not a year of housing recovery. "The market faces into further headwinds in the next 12 months, both on the demand and supply sides - household incomes are falling in real terms and interest rates are likely to rise while, in reality, funding and regulatory pressures across the UK market will mean little change in the pattern of mortgage activity in the short-term," he said. "Overall, 2011 may be the year when the local market bottoms out."

PA