Threat of negative equity mounts

Posted: 03 Feb 2009 09:03:05 GMT

The Centre for Economics and Business Research (CEBR) has published research suggesting that the housing market may not bottom out until prices drop a full 40 per cent from their peak.

Most house price forecasts until now have suggested the housing market will bottom out after losing 25 per cent of its value, but the CEBR's figures point to a much greater fall, and suggest that the market may even lose 25 per cent of its value in 2009 alone.

Such a phenomenon will no doubt cause homeowners distress but could mean a great deal more first-time buyers are within reach of the property ladder for the first time.

Benjamin Williamson, co-author of the report and an economist at the CEBR, said: "The glimmer of light at the end of the tunnel for the beleaguered housing market is that prices and interest rates are now at levels whereby any improvement in lending is likely to lead to substantially increased activity and at the very least a bottoming out in house prices."

When banks eventually do ease up their lending criteria the demand for property seems likely to rise acutely, as prices could be as low as £139,000 for the average property, the CEBR said.

Those determined to find the best deals on a property when demand rises, however, could benefit from buying a property online, which can save buyers costly estate agent fees.



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