BELFAST BRIEFING:PLUMMETING PROPERTY prices in the North have created a web of despair for buyers who are trapped in negative equity even before they have taken possession of their new home.

But that is not the worst case scenario for purchasers in Northern Ireland today. The nightmare that some now face is the possibility of legal action by developers who want to force them to complete on deals agreed at the top of the property price boom.

Property values in Northern Ireland, as in many other places, have fallen dramatically over the last two years.

The average house price in the North in the early 1990s, prior to the IRA ceasefire, was around £50,000. At the height of Northern Ireland’s short-lived property boom in 2007, the average price had soared past the £250,000 mark.

It was a remarkable transformation even for a market which had been artificially low because of the backdrop of the Troubles.

Lisburn estate agent Tom McClelland believes that for a short period the market in the North was in “catch up” mode with the rest of the UK – outperforming every region in Europe two years ago.

At that time, McClelland, who is a Northern Ireland spokesman for the Royal Institution of Chartered Surveyors (Rics), was warning that the boom in house prices could not be maintained. Few appeared to listen to him as properties continued to sell at record values – and at record speed.

Research carried out by the University of Ulster suggested that, by November 2007, apartments were showing some of the strongest growth in property prices in the North. It found the average price had increased year-on-year by a staggering 43 per cent to £205,178.

Belfast, which witnessed some of the sharpest rises in value, was overrun with new property developments.

It seemed as if there was not a corner of the city which was immune to the charms of a new “luxury” apartment development. They were inevitably launched in a blaze of publicity and naturally “sold out” a few hours later.

The Arc located in Titanic Quarter in the east of the city and the Bakery in the south are just two examples of apartment developments which enjoyed a frenzied response to their respective releases in 2007.

When apartments were first released in the Arc – with one bedroom apartments selling from £195,000 and a price tag of £850,000 on the penthouses – 350 were snapped up in a short time.

It was a similar scenario at the Bakery, where one-bedroom apartments were priced at £250,000 and two-beds between £300,000 and £360,000. The response from prospective buyers saw the number of units released in the initial phase double to 100.

It appeared as if Northern Ireland, Belfast in particular, had become intoxicated by the property boom. Barely two years later – and the hangover pervades across the North.

According to the Council of Mortgage Lenders (CML), record numbers of people in the North now own homes that are worth less than the mortgage on the property.

Northern Ireland’s property market had traditionally been one of the most stable in the UK up to the late 1990s. Today, negative equity is an unhappy reality for a growing number, particularly for those buyers who agreed to purchase properties in the likes of the Arc and the Bakery developments at the top of the market.

Developers are now pressurising some of these people, who have failed to complete purchases, to do so or face legal action.

The developer behind the Bakery scheme is one of a number who intend to pursue buyers to honour their commitments through the courts.

Big Picture Developments – the development vehicle of Barry Gilligan, the former chief executive of Dunloe Ewart and current chairman of the Northern Ireland Policing Board, and Kevin Stanley of Dublin-based Stanley Holdings – has issued writs against buyers who have not completed on apartments on which they paid deposits.

Another property firm that has already gone down the legal route with regards to buyers who have not completed is PBN Property. The Belfast-based company, which specialises in commercial and residential development, was established by the former regional director of Anglo Irish Bank in the North, Neil Adair, and two other high-profile Northern Ireland businessmen; Patrick Kearney and Brian McConville.

It intends to take legal action against buyers who have not yet completed in relation to a development at Stockman’s Way in Belfast. These buyers have in turn appointed lawyers and intend to launch a counterclaim against PBN Property.

A group of purchasers of apartments in the Arc in Titanic Quarter fear they could face a similar scenario, and they have formed the Titanic Action Group.

In this instance the developer, Titanic Quarter Limited, a sister company of Dublin-based Harcourt Developments, has not taken any legal action to date but the completion date is drawing near for apartments agreed in the first release, and some of the buyers involved are growing anxious.

The action group wants to meet with the developers to discuss the fall in apartment prices and the impact this has had on them.