Four-Year Negative Equity Warning For Homeowners

Tens of thousands of homeowners who bought a property during the housing boom face another four years of being trapped in negative equity, according to the National Housing Federation.

The NHF said that people who purchased a property in England at the peak of the market in 2007 paid an average price of £216,800. But they are warning that they will have to wait until 2014 - when average prices are expected to hit £226,900 - before they recover what they paid for their home.

The NHF said that the new report, entitled Home Truths 2010, showed that the country was now "in the midst of the worst housing crisis for generations" and warned that an entire generation of people could be "locked out" of the housing market because of the high prices, while the shortage of social housing would leave them with "little realistic chance" of getting a social home.

Independent economists Oxford Economics forecast house prices would increase 22% over the next five years - fuelled by a chronic under supply of new housing.

According to the research, house prices will rise 7.5% this year, but will then fall again in 2011 by 3%, before recording a modest increase of 0.9% in 2012.

House prices will then increase by 4% in 2013, 5.4% in 2014 and 4.9% in 2015 - 22% higher than they were in 2009.

The NHF report found that supply of new housing is falling, with only 87,360 new homes being started in England in 2009/10 - which is only enough for a third of the new households forming each year.

The report also found that 1.76 million households - the equivalent of 4.5 million people - were on social housing waiting lists in 2009, a 23% increase in the last five years.

Federation Chief Executive David Orr said: "For those who bought at the peak of the housing boom, there's a strong possibility that they will have to wait another four years before their home is actually worth what they paid for it.

"But house prices will inevitably increase in the long term because of huge under-supply of housing. 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 forseeable future and people will increasingly look to buy or rent an affordable home instead.

"But the government's decision to scrap regional house building targets, withdraw funding for new affordable housing schemes and to cut budgets, means the future looks bleaker than ever for millions of people currently stuck on waiting lists.

"Proposed caps on housing benefit payments could also put nearly a million people on low incomes at risk of losing their home - and further deepen the nation's dire housing crisis.

"We would urge the government to closely consider the huge human, social and economic cost of failing to invest in affordable housing."

Mr Orr added: "We understand the need to reduce the deficit and housing associations are continually thinking about how to build homes while being even more effective and innovative - and maximising the value they deliver for the public money invested."

(KMcA/GK)