Negative equity to remain for four years
Homeowners who bought at the peak of the property boom face another four years of negative equity, a report warns today.
A forecast from the National Housing Federation warns those who bought homes in 2007, when the market had reached its peak, will have to wait until 2014 to recover what they paid.
Economists at Oxford Economics predict a chronic under-supply of new housing will lead house prices to increase 22 per cent over the next five years.
Prices will rise 7.5 per cent this year, falling by 3 per cent in 2011 and rising again by 0.9 per cent in 2012, the research forecasts.
The NHF’s report, Home Truths 2010, finds the supply of new housing is falling. In 2009/10, the number of new homes in England – 87,360 – met just a third of the demand for housing. House prices nationally are still 120 per cent higher than they were 10 years ago.
The Fed is warning that an entire generation of people could be locked out of the housing market as a result of high house prices.
Chief executive David Orr said: ‘Even though price rises look sluggish for the next few years, affordability is not improving for many low-to-middle income households – as banks continue to restrict their mortgage lending and house prices remain historically expensive in relation to salaries.
‘There’s a very real risk that an entire generation will be locked out of the housing market for the foreseeable future and people will increasingly look to buy or rent an affordable home instead.’
View results 10 per page | 20 per page
Have your say
You must sign in to make a comment
Readers' comments (13)
Melvin Bone | 31/08/2010 10:42 am
It's not necessarily a negative equity situation for most people who bought at the peak unless you had 100% mortgage...
Most buyers already had equity when they bought but now have less than before.
Nice headline though eh?
Unsuitable or offensive? Report this comment
Sidney Webb | 31/08/2010 10:43 am
I'm sure our government will find a way to blame this on tenants, immigrants, single parents, or all three.
What is relevent though is house prices are still far beyond the reach of the majority on low to medium pay levels. The average person can not afford to buy. Nor can they afford to rent privately without beenfits to pass on to their landlord. Nor can they rent socially as supply is so low.
House prices stagnation for four years would be good news for affordability if it were not for the fact that wages will continue to be driven down and the share of taxes paid by the lowest earners driven up to soften the recession for the wealthy.
David Orr is right to say"There’s a very real risk that an entire generation will be locked out of the housing market for the foreseeable future and people will increasingly look to buy or rent an affordable home instead." But this simple fact is that there is no chance of finding either as successive governments, supported by the most selfish tendency, have removed such choice from the majority of people.
Unsuitable or offensive? Report this comment
Melvin Bone | 31/08/2010 11:46 am
Following the last boom and bust of house prices in the eighties I could not afford to buy anywhere for 15 years.
Its a recession. Its nothing new.
Unsuitable or offensive? Report this comment
Chris | 31/08/2010 11:58 am
I'm shocked - are you saying that there were recessions and housing crisis under the most wonderful government that ever walked the earth. But I thought it was all the last government's fault - who was to blame in the 80's then?
Unsuitable or offensive? Report this comment
Melvin Bone | 31/08/2010 12:51 pm
'I'm shocked - are you saying that there were recessions and housing crisis under the most wonderful government that ever walked the earth.'
Are you referring to the Gladstone governments rise to power in 1885 or Lord Salisburys in 1886?
That was a bit before my time...
Unsuitable or offensive? Report this comment
Chris | 31/08/2010 2:23 pm
You can't fool me Melvin - after so much encouragement I've been reading the Daily Mail and can inform you that there were no primeministers before Blair, everything is the fault of the Labour Party, including the Norman Invasion which was down to their relaxed borders policy.
Indeed the economy has never been in the fine shape it was in when Tony took over from Augustus after his establishment of Catholicism at York, it all went down hill from their really.
There is a rumour that Mandelson was once disguised as a snake in some garden somewhere, but factual evidence remains sketchy.
Unsuitable or offensive? Report this comment
Melvin Bone | 31/08/2010 3:59 pm
I know I cannot pull the hairshirt over your eyes CW.
I used to read the Mail and the Mirror and divide by two for the truth.
The truth is much harder to find now in the days of spin on spin.
Sure the Tories had some cock-ups but I think they did a 100% better job than Callaghan/Foot/Kinnock would have ever done.
The good news is that like most people I've never had negative equity.
Unsuitable or offensive? Report this comment
Chris | 31/08/2010 4:29 pm
It is a shame that whilst the Tories were doing such a good job they never thought to invest the proceeds from North Sea Oil like the Norwegians did. It is also a shame that the proceeds from the mass nationalisations were not put to productive longer term use instead of being given away to friends and family. It is also a shame that the proceeds of Council house sales were not invested in replacement housing, but instead also given away to friends and family. Three headline areas that are testimony to a Tory rule that may as well have been introduced under the heading Spend, Spend, Spend, for none of the one off incomes was used for prudent investment to help secure our future.
Lecture after lecture is given about spendthrift Labour, and Labour are guilty, but even they are not a patch on the spending achieved under Thatcher in terms of foolhardness and lack of prudent long term perspective.
What is the alternative - after such a short time since the election, sadly it does not seem to be the Liberals. That leaves the lunatic or dangerous fringe as existing offerings. The only rational alternative therefore is to argue, lobby, and call for change in the hope that it is not too late to reverse the apparent suicide pact the major parties have signed for us.
Unsuitable or offensive? Report this comment
Melvin Bone | 31/08/2010 4:37 pm
So...
Tories= No.
Labour= No.
Liberals= No.
Lunacy = Yes.
Hmmm.
Unsuitable or offensive? Report this comment
Chris | 31/08/2010 4:52 pm
Lunacy does seem a fair description of what we have and have had - the question is, how do we get the asylum back into less devisive control.
For instance - bemoaning the fact that house prices will not rapidly increase for at least another four years is the realm of lunacy, a sane individual would celebrate the potential onset of greater affordability for the positive effect this would have for wider society. Isn't my negative equity, which does not effect me unless I'm looking to sell or borrow, less important than someone elses homelessness.
David Orr is right to point out that affordability is not improving and the social impact that may have, but there is no serious political initiative being put forwards from government.
Unsuitable or offensive? Report this comment