More glum news for British homeowners; you are expected to lose the equivalent of a ‘typical annual salary’ from the value of your home by the end of 2011 according to new research.
In what’s being described as a ‘second house price crash’, Economist magazine is pre-warning homeowners with their dire financial predictions of banks being increasingly reluctant in lending money which will ultimately lead to a decrease in prices.
The survey results come at a time where those struggling to keep up with mortgage payments are increasingly turning to sell and rent back options. It’s often said that the one main downside of the scheme – that sellers are unlikely to achieve the market value for their home as they often do with an estate agent – is negated by the predicted house-selling gloom and the fact that a quick property sale through the scheme takes care of estate agent fees.
The news also comes as the latest Nationwide house price index reported typical values dropping 0.9% last month. That follows a 0.5% decrease in July.
The slump in prices follows a ray of light during the past year which some described as a mini property boom but it now looks as though they spoke too soon.
Martin Gahbauer, chief economist at Nationwide, said: “As more sellers have returned to the market, buyers have a greater selection of properties to choose from and more bargaining power with which to bid down asking prices.”
Ed Stansfield, chief property economist at Capital Economics, said: “The rebound in house prices lacked any firm foundation.
“Judging the speed with which the second leg of the correction will unfold is difficult. If interest rates are kept at current levels for the foreseeable future, that will help to mitigate the impact of renewed rises in unemployment and the squeeze on household incomes stemming from the tightening in fiscal policy.
“On the other hand, if house price expectations take a turn for the worse, or if mortgage credit conditions tighten further, that would tend to increase the pace at which house prices move back to more sustainable levels.”
Figures from the Bank of England released earlier this week showed that only 48,722 mortgages were approved for house purchase during July.
Nationwide reported that the 0.9% August 2010 fall means the average cost of a home stands at £169,347.