The average house price in Northern Ireland rose modestly in the first quarter of this year - but any recovery in the market remains tentative - according to a new survey of house prices.

The latest University of Ulster Quarterly House Price Index, produced in partnership with Bank of Ireland and the Northern Ireland Housing Executive, recorded an annual weighted rate of price growth of 4.9%.

However, the number of transactions reported by the 120 estate agents in the survey fell back to 800 from more than 1,000 in the final quarter of 2009.

The authors of the report - Prof Alastair Adair, Prof Stanley McGreal and David McIlhatton - said: "The latest data highlights the tentative recovery of the housing market, with a weighted rate of price growth over a year of 4.9%.

"However, the findings suggest that recovery is patchy and varies across different property types and areas of Northern Ireland. The pace of growth is likely to be impacted by macroeconomic conditions and the steps that the new government takes to reduce the public deficit."

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The authors said the smaller sample size in the first quarter was caused by continuing difficulties in the market, the cold winter and the change in stamp duty, which produced a flurry of sales in the final quarter of last year.

The overall average price of a house in Northern Ireland for the first quarter of this year was £169,497 compared to £161,429 in the final quarter of 2009.

The report uses a weighted index to even out the fluctuations in sample composition and this showed an annual growth rate of 4.9% in the first quarter of this year in stark contrast to an annual decline of 35% recorded in the first quarter of 2009.

The economist Alan Bridle, Head of Economics and Research at Bank of Ireland Northern Ireland, said: "Eastern areas such as Belfast and North Down seem to be seeing some signs of recovery but the picture for Mid Ulster and the west remains particularly challenging.

"The recovery will be patchy and uneven in 2010 and I expect the average house price to remain a little erratic until sales volumes return to more normal levels.

"The market is increasingly influenced by the private rental sector which has grown significantly because investors or owner-occupiers are either unable or unwilling to sell at the new lower price levels, while demand has risen from those who find it harder to obtain a mortgage or who have deferred buying a home in the belief prices will fall further."

The survey confirmed the affordability of housing, with 54% of all properties selling at or below £150,000.

The Housing Executive's Head of Research, Joe Frey commented: "The latest Quarterly Price Index provides further evidence of stabilisation in the housing market.

"However, bearing in mind the wider economic context and the expected reductions in public expenditure it would appear that the road to a more balanced housing market will be challenging."

(NS/BMcC)