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North-east: property hotspot by 2011?

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The north-east could overtake Northern Ireland as the UK's top property hotspot in the next five years, according to new research.

Prices in the region have rocketed since 2001, reports a study released today by the National Housing Federation (NHF): last year, property prices shot up by 9.5 per cent leaving the average house priced at £126,000. The latest Nationwide survey put the annual price increase at eight per cent for the year up to the end of October 2006, when the average property, nationally cost £169,623.

Stronger than average growth coupled with significantly lower than average house prices has been the reason why Northern Ireland has topped many experts' property hotspot tables and it appears that the north-east could mirror this success.

The report contains staggering figures from Oxford Economic Forecasting, which predict that by 2011 the average house price will have breached the £210,000 mark; a prospective jump of 67 per cent from today's prices.

Although bad news for those looking to get on the first rung of the property ladder – the report aims to put pressure on the government to assuage the impact of the "housing timebomb" on the less wealthy – homeowners in the region will be delighted at the prospect of their investments amassing such value in a relatively short space of time.

A major contributing factor to the rapidly rising prices is the nationwide shortage of supply, which is particularly prevalent in the north-east.

The NHF claims that the lack of housing in the region has become chronic: since 2001 the number of households on housing waiting lists has increased by 44 per cent and now stands at 90,000, but last year only 7,000 new homes were built and less than 700 were could be classed as 'affordable'.

While many may see this as evidence as the perfect time to buy-to-let – and it is a fair bet that the demand for renting will mushroom as house prices spiral over the next few years – it is worth considering that the region's economic performance has not been particularly strong in recent times.

In a statement the NHF said, "the north-east has higher than average unemployment, the lowest economic performance, the lowest average income and lower than average educational attainment" compared the UK as a whole.

Such problems may inhibit the buy-to-let sector as tenants, in many cases, would not be able to afford the market rate rent and allow investors to pay off their mortgage or other loans secured against their properties.

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