It could be 2016 before house prices recover to the levels they reached at their height last year, according to researchers. The findings by Savills will be bad news for Britons who purchased houses recently and could face living in negative equity for a period of up to eight years. As their mortgages will be higher than the value of their homes, they will be stuck in properties they cannot afford to sell.
Another report revealed one in ten homeowners might be in negative equity by next year. Research by the Sanford Bernstein bank showed house prices could plummet as much as 35 per cent from their peak last summer. A fall of that magnitude would burden 11 per cent of the total, equivalent to 1.3 million households, with mortgages valued at more than the price of their home.
The forecast by Savills was less grim, with the estate agents predicting a drop of 25 per cent on last year's peak by the end of 2009. It believes prices will recover in the end, but when exactly this will happen will depend on where you live.
In the South-East and Scotland, prices are forecast to return to their peak 2007 levels in 2012. The South-West, London, the East of England and East Midlands will achieve this in 2013, the West Midlands in 2014 and for Wales, the North-West and Yorkshire this is predicted to happen in 2015. Other parts of the country will be in for a much longer wait, with home-owners in the North-East and Northern Ireland not predicted to see a recovery until 2016.
A director of residential research at Savills, claims the type of recovery will be very different around the country as a result of various factors including employment in the different regions, the salary level and general confidence about the economy. She blamed the downturn on 'the lack of mortgage finance', because buyers have been unable to get a cheap loan - especially young people without a deposit. On a more positive note, she stated that the current crisis will be 'all forgotten by 2020' with prices rocketing again.
Overall, Savills estimates average house prices in 2020 to be almost 50 per cent higher than last year's peak - at an average of 323,240 ponds. This means prices will be more than 100,000 pounds higher than in 2007 when the average cost was 220,000 pounds. After the recent barrage of bad news, this prediction will offer some relief to those who had thought that a recovery might never happen.
The prediction that prices will continue to fall until the end of 2009 will prevent more people from investing in the housing market. Official figures from HM Revenue and Customs revealed the amount of people buying a home has collapsed.
Even with the temporary stamp duty holiday on homes purchased for less than 175,000 pounds, waiting to buy would save more money for many. A home bought when the duty suspension ends in a year's time may turn out to be less expensive than a home purchased today with no stamp duty bill.
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