THE housing market in the North has exploded in the last few years, but particularly in the last year, with house prices near the Lisburn Road topping the �1m mark. Last year alone, house prices rose nearly 40%, surpassing the rest of the UK. This means certain areas of Belfast, for instance, are already exclusion zones for "rst-time buyers. In southern Belfast property price gains are increasing at such a rate that they are overstepping the affordability gap quite substantially. The fact that many buyers are property investors capitalising on the lack of general affordability doesn't help!

I would estimate over 70% of outside investment is coming from the ROI market. Estate agents are harping on about the fact that this is all just part of the 'catching up' with the UK housing market. But statistics tell us NI's economic performance lags that of the rest of the UK, so we are not playing 'catch up' in plenty of areas. Southern investment in NI has been based on cheap money and a weak euro whereby investors borrow at low rates in the south and any rental income is in sterling - advantageous while sterling is strong.

In a wider context, many of the average house prices in the rest of Britain are on a par or lower than average house prices in NI. Moreover, what drives and sustains the house prices in London is the high rate of employment and salaries. Historically, this has not been the case in the North. So how can all this amount to a 'catch up'?

There is an affordability issue with the rental market too. Housing bene"t levels have failed to keep pace with private market rents and the gap continues to grow. This has led to the unwaged having to "nd (from other bene"ts) the difference between housing bene"t and the actual rent. This also has an impact on low-waged earners.

Overcrowding is on the increase and this is condoned/encouraged through the government's single-rate policy for the under 25s.

There are three major factors which are relevant to this situation:

NI has a more robust and strictly policed framework to houses in multiple occupation; interest rates in the euro zone are under pressure and may rise, impacting on the low loan repayments of southern investors; the euro is comparatively weak against sterling at present and this could also change in the near future.

When the housing market boomed in the south it was also driven by demand in the rental sector. In NI we are seeing streets of 'To Let' signs where southern investors are not that bothered if the house rents out or not. They have bought the property for appreciation purposes, seeing a trend emerge here that choked the south during the Celtic Tiger years. That is not the case in Northern Ireland. While properties are being left vacant by a dip in rental demand, those who really need to occupy rental properties are being excluded.

One of the solutions being proposed relating to vacant properties is a change in the rating system to allow full and/or progressively increasing rates on empty properties to encourage their release on to the market. These costs could have a big impact on marginal returns. This is something southern investors may have overlooked.

Although this may sound gloomy for the investor the perspective for those without accommodation or living in inadequate accommodation is much more dire and immediate. Those involved in voluntary social housing should call on the new assembly to consider the continuation of the Thatcherite house sales policy.

Finally, there are suggestions there may be unresolved capitalgains-tax issues with respect to the European tax-treaty arrangements between the north and south of Ireland and this could effect the property-investment arrangements for southern investors. All of these issues are being brushed aside in the rush for a 'good' sale.