Forty percent will be wiped off Northern Ireland house prices - from their August 2007 peak - by the end of next year, it has been claimed.

Ulster Bank made the prediction in a recent assessment of the Northern Ireland economy.

The bank predicted the local economy has already fallen into recession, claiming the province would be the worst affected area in the UK during the thrusts of an economic downturn.

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According to the Ulster Bank's Quarterly Economic Review, the Northern Ireland economy will contract by 1.5%, creating a sharp rise in unemployment.

Northern Ireland’s high dependency on the public sector will not act as a buffer in the looming financial crisis, as it did in the early 1990s, the bank warned.

Economist with the Ulster Bank, Richard Ramsey, said the province’s large exposure to the construction trade, teamed with a slowdown in public spending, would heighten the gloom for Northern Ireland.

"It is our view that the local economy is already in recession with private sector output having contracted for the past four quarters," said Mr Ramsey.

(PR)