Homeowners could face years of negative equity

A warning has been issued by a housing group that some homeowners in the UK could be facing several more years of negative equity. According to the National Housing Federation homeowners that purchased their homes at the peak of the property market could still be facing around four more years of being in negative equity.

Negative equity is where the homeowners owes more on the mortgage on the property than the current value of the property, and because the value of property plunged after the housing peak in 2007 many people that during the peak have seen their investment crumble, as the value of their home has dropped below the amount that they owe on it.

The NHF has said that homeowners that are in this situation may now find that they have to wait until around 2014 before property prices recover to the point where the value of their home rises above the amount that they owe on the home by way of a mortgage.

Officials from the NHF have said that they expect house pries to dip by 3 percent again next year before they start to increase after that. By 2015 the group expect property prices to be around 22 percent higher than they were in 2009, and this would make the average property price to £226,900.

NHF chief executive David Orr said: “A combination of circumstances in the market have made it very, very difficult for house prices to recover. But actually the big problem that we have is that we’ve created a kind of perfect storm where there is negative equity for some people and they’re trapped and can’t move, but prices haven’t come down enough to make buying a home a realistic option for people in their 20s and 30s in ordinary jobs. We really are in danger of pricing people out of owner-occupation.”