Wednesday, October 31, 2012
17% of those who have suffered price falls since 2007 hit by
'negative equity curse', rising to 21% amongst those who bought at
the peak of the market in 2007.
OPTIMISM RISES BUT 'NEGATIVE EQUITY CURSE' A 'MARKET
MILLSTONE'
Proportion of price optimists forecasting higher prices in 12
months' time increases from 22% a year ago to 29%, with 'improving
mortgage market' a contributory factor.
Diminished equity to trade up remains a drag on market activity,
with more than one in five (22%) of 2007-2012 buyers stating their
property is now worth less than they paid for it.
Proportion of price optimists forecasting higher prices
increases from 22% a year ago to 29% Rightmove's latest Consumer
Confidence Survey of more than 33,000 home-movers finds that the
proportion of respondents expecting average asking prices to be
higher a year from now has risen to 29%, up by 7 percentage points
on a year ago. Despite an increase in optimism on prices, overall
opinion remains divided; while 26% expect average prices to be
lower and 29% expect prices to be higher in a years' time, 41%
expect prices to be about the same. Many 'price optimists' - those
anticipating higher prices - point to an improvement in the
mortgage environment as grounds for their view of upwards price
movement. Those anticipating an 'improved mortgage market' are up
from 28% at the start of 2012 to 32% as we approach the end of the
year.
Miles Shipside, director and housing market analyst at
Rightmove, comments:
"Those predicting a pick-up over the next 12 months will no
doubt have hopes that the Funding for Lending Government scheme
will provide the seed-corn that will encourage more lenders to
scatter more mortgage products onto the volume-barren housing
landscape. The mixed bag of local market conditions however,
coupled with this patchy picture of sentiment, does nothing to
suggest that an overall housing market recovery is looming on the
horizon despite the wider economy officially emerging from the
double-dip recession."
Diminished equity to trade up remains a drag on market
activity
The return of price confidence and mortgage funding are crucial
ingredients for a market recovery, especially in light of research
into the extent of negative equity in the post-creditcrunch housing
market. More than one in five (22%) of home-owners who bought in
the six years between 2007 and 2012 believes that their property is
now worth less than they paid for it. However, the 'loss' is most
acute for those who bought in 2007 when prices peaked and high
loanto- value mortgages were still commonplace. Nearly half of
home-owners (49%) who bought in 2007.
Shipside comments:
"While a fall in equity is not necessarily a blocker to a move,
with lenders demanding a substantial deposit to unlock their best
rates it will deter many from trying to sell and buy again. As long
as the sums do not add up to make a move up the market worthwhile
we are unlikely to see a substantial recovery in the volume of
sales. Many home-owners who are trapped by the falling value of
their bricks and mortar will now feel as though they are prisoners
of their own mortgage. Five or six years on, many of the first-time
buyers of 2007 will be struggling to progress from starter pad to
family home."
17% of those who have suffered a price fall since 2007
hit by 'negative equity curse'
17% of those 2007-2012 buyers who believe their property has
declined in value since purchase also state that they are currently
in negative equity, believing their outstanding mortgage balance to
be higher than the current value of their property. This rises to
21% amongst those who bought in the peak year of 2007. The fact
that there are more price optimists than this time last year is
encouraging news for both those in negative equity and those whose
equity pot has shrunk.
Shipside observes:
"In the post-2000 free-for-all, many lenders adopted a policy
that assumed negative equity was a phenomenon from a previous age.
Many built strategies on the cornerstones of increasing property
prices and low or no deposit lending. The result of this approach
is a negative equity millstone around the necks of many buyers from
that era which will take years to lift. In the current economic
climate it will take more than a modest recovery in property prices
to help its victims to consider moving home again. Ironically, the
market would now benefit from a return to some of the
characteristics reminiscent of those lax years that helped cause
the problem of falling equity, with a return to increasing property
prices on the increase and lower deposit lending.
However, the new FSA rules on lending, set for 2014, should
ensure that lenders cannot repeat the mistakes of the recent
past".
from Propertyreporter.co.uk