Four out of five homes purchased in Britain since 2006 are now worth less than the purchase price.
Research from Zoopla published this morning claims that of the 4.32 million homes purchased since 2006 and where the ownership remains the same, 3.5m (80%) are worth less today than was paid for them.
Zoopla lists over 17 million previous sale prices and provides current value estimates for every UK property.
Its new research says that 93.2% of homes bought in 2007 and 88.9% of those bought in 2008 are now ‘under water’ – or worth less than their purchase price.
On a regional level, the North-East of England is the worst affected, with 93% of properties purchased since 2006 yet to climb back to the prices paid for them.
At the other end of the scale, less than half (46%) of homes bought over the last five years in London are now valued below their purchase price, underlining how much more resilient the capital has been to the property downturn versus the rest of the country.
Nicholas Leeming, Zoopla’s business development director, said: “There is an unprecedented number of home owners stuck with homes they bought in recent years with the expectation that prices would continue to sky-rocket.
“As a result of not wanting to take a loss on their asset, many owners have been unwilling to set realistic asking prices to sell them.”
Comments
@Mike Wilson "many on here wear - convinced, as they are, that all that is wrong at the moment is that the banks had a bit of a fright and are being a bit careful at the moment - but, sit tight and normal service will be resumed shortly."
Apart from Interest rates return to their long run average, c5%, of course.
I like your realism Mike, its makes me die that companies like Foxtons, who the new owners paid £390m for in 2007 have somehow found some mug to lend them more money to open up another 20 branches whilst its clear to anyone with any nous that estate agency faces major headwinds, not only with the meagre economic outlook, but by the fact that multiple-branch estate agency is being eroded every year by internet based estate agency.
"Does anyone else think Mike Wilsons Comments make you want to slit your wrists?"
Now, now - I can't take the credit if estate agents slit their wrists.
Joking aside - I can't help it if I see things how they really are. I'm sorry but I can't wear the rose-tinted spectacles many on here wear - convinced, as they are, that all that is wrong at the moment is that the banks had a bit of a fright and are being a bit careful at the moment - but, sit tight and normal service will be resumed shortly.
Please step forward and take your happy pill from nursey.
In fact things are looking good at the moment - there is almost certainly another crisis brewing the result of which will be that the banks will never again be given free rein to enslave the population with unmanageable debt. This is a good and positive thing and, for your children's sake, you should rejoice.
Slowly but surely the government and the economists that advise them have cottoned on to the fact that you can't base an economy on a ponzi scheme that constantly inflates house prices by increasing consumer debt. It took 10 years of artificial, debt fuelled boom and a banking crisis for them to realise it but, slowly, the penny has dropped.
Now, I must replenish my stocks of baco-foil - so I can make sure my thought patterns are not intercepted.
UnhappyChappy - afternoon to you too sir! (or Madam)
Granted the word "Sold" is not there but the word "purchased" is and the flipside to having "purchased" something is that the item purchased was indeed "sold"....it also says "now worth less than the purchase price." and you refer to "value"
Worth and or value relating to property my opinion is that a property is "worth or its value" is what someone has been or is prepared to pay, so again this article can only be talking about "sold" prices otherwise it is merely guessing.....
Which is why I think only when you come to sell or refinance a home should anyone really care what your property is worth and even then the price is out of your control both upwards and downwards as the market will decide.
Your comments on only Auction property or poor condition property will be worth more now than 2006 is just not correct for everywhere...including "up North" I have one office in particular in Stockport, Cheshire showing 2011 to be the potentially the "new peak"! and my other offices also in Stockport each selling for values in excess of 2006.
Afternoon RIC - Perhaps i am mistaken but the article does not mention anything to do with sold prices it says the value of many homes bought post 2006 is below what the occupier paid. I would have to agree with the article as in my eyes this is indeed the case. im sure to the occupiers it is not the case either through denial or ignorance. However, I am sure there are homes purchased in 2006 that will sell for more than they were purchased for........they will either have been purchased at auction, or in a very poor state and completely modernised or purchased by someone who has not done there research or given poor advise or wealthy enough not to care.
Does anyone else think Mike Wilsons Comments make you want to slit your wrists?
Lighten up man, enjoy life. Yes the country is in the brown stuff, just get on with things and stop worrying
The worry about 'negative equity' may turn out to be irrelevant.
When Greece defaults, the very same US banks that had to be bailed out in 2008 - and our banks too - will need to be bailed out again as they have to pay out on the credit default swaps used by the purchasers of Greek debt to insure against the risk of default.
At some point in the relatively near future, the inverted debt pyramid is going to collapse - with a huge collapse in the money supply. At this point all bets are off. You'll be worrying then about food and energy - not house prices.
In 2008 we came within hours of the banks closing the cash machine network (this is a FACT, not an opinion). That crisis was not fixed, it was kicked down the road by way of QE and temporary shelters for 'troubled assets'.
The problems in Greece, Portugal and Ireland expose the 'too big to fail' American banks to a payout of about $200 billion.
So negative equity may be a mere trifle in the scheme of things. A full blown banking crisis may mean that everyone has to default. Think your money is safe in the bank?
Hi Unhappy Chappy
You are correct on the remortgage front, people looking to refinance are also effected BUT........
My point is only that the story does not cover selling at below what you owe or refinancing when your value is below what you owe which is the Neg Equity like you say......it just waffles about people are selling for less than they paid, many are selling for more than they paid and certainly if we lets say spin the story back to stats dating from 2002! (daft logic I know! but the story is a bit naff)
My thoughts as an EA on Neg Equity....well its horrible and no doubt many feel desperately trapped by it....you would not wish it on anyone, but then these are my thoughts as a person as my my job has no effect on my thoughts about it (do you mean how does it effect an EA?) but it is a fact of the economy and I think the problem is it will always be around as only when prices hit Zero can anyone truely buy in confidence that they will not lose ANY money! (Daft logic again but true! as even a 50% drop today means Brit1234 if he eventually buys will still be at risk the market could drop again! So where does it have to stop?)
Time to sort a few things out
@FTBDan
Heard of the Empty Homes Agency have you? It was created (another QUANGO) probably 20+ years ago and was certainly around when I was on my negative equity explaining mission for NBS in 1991-92.
Your 100's of thousands of property in theory available and useable and just needing to be identified is correct but it never will be. Why - because the process is too difficult. Local Authorities found this when they tried using the EHA powers they have a few years ago and stories of houses being taken over when the owner was in a mental hiospital for a year started surfacing. or before probate was sorted etc.
But you are right on the money on your 10;54;20 post. It grieves me to say so becauae often you talk tripe but the whole jkey to the next 5 years AT LEAST is Greece, what it does or is allowed to do, and thoise who follow (Portugal, Spain and Ireland to name but three). This crisis is so serious and so all embracing and yet so few can see it - astonishing.
Speaking of postings Chris Wood you intrigue me or rather your career path does. You started in 1989 on possesions of property and now are involved in possession of countries (I reer to Afghannistan and Iraq etc and don't get me wrong in the sentiments behind that comment either).
You can comment all you like because you are anonymous and above all the military can comment on such issues - I was in the Army too once.
Ray Evans
The price of anything is only what someone will actually pay for it. And don't get sucked into arguments about selling well or badly on anything - you sell for the right price all the time.
RantnRave is dead right in his post on this. Value (as well as beauty if it is art) is in the eye of the beholder.
Rant - Please don't be naive enough to think that sellers count their own "memories" of the house towards the price they list at - that makes you sound silly.
Yes, of course, physical work done to the house can certainly get people carried away.
Just because one or two people may increase their house price because of the happy memories, does not mean anywhere near a significant number of other sellers do this. Sellers are not as stupid/oblivious as you think.
Never assume. Some people have time to make paper clip sculptures while sitting at their desks - most workers do not. This doesn't mean that most workers aren't being as productive as they could be ;)
@rantnrave
Have you been to a contemporary art gallery lately?
You should have your paperclip valued - you never know!
;>)
I have now concluded my opinions on todays posts.
On my desk, I have a sculpture that I have carefully crafted from a paperclip. Knowing the effort that I have put into shaping and forming it, I think it is worth thousands. However, should I try to sell my sculpture, I think I would get a rude awakening as to how much anybody else thinks it's worth...
Any item is essentially only worth what another person is willing to pay for it. A lot of the current stalemate in the housing market stems from people who bought their house years ago, but because they have memories there and made changes to the property believe it is 'worth' far more than somebody else is willing to pay.
In certain cases where these properties have had to be sold, auctions have suggested values that would see tens or sometimes hundreds of thousands of pounds slashed from current asking prices.
@rantnrave
According to Words Thesaurus
worth-value,merit,appeal,significance,attrsction,importance,meaning
but also in my view to a person and the cost of producing.
But I live to learn from anyone! ;>)
Ray - how do you define 'worth'?
SOME houses are being sold for less than they are worth - but not because they are worth less!
Why? Just a thought!
Its bad for these reasons:
If the mortgage is more than the value then everyone will stay put or be reposessed. They cant move in the conventional way because they wont be able to carry forward any capital for their next purchase or pay their beloved estate agent from the proceeds, this leads to low tranaction volumes for the agent as fewer of his vendors are able to sell for what their houses are worth..
A fool and his borrowed money are separated even more easily.
A fool & his money are easily separated.
@RIC - Hello...you do not have to sell a house (as in actually transfer ownership) to be in Neg Eq , people who want to change mortgage lenders can and increasingly will find themselves in Neg Eq. I would welcome the thoughts fropm Estate agents on whether Neg Eq is good or bad for EA business?
Why is Negative Equity in the headline, yet the body of the story does not mention anything about prices being less than the amount borrowed by the purchaser?
Is negative equity not when you sell a house and the amount of money you receive is less than what you owe the mortgage company?
This will be the mother of all recessions. The 90's was pretty bad but this will be much worse, the debt is simply eye-watering! If you ran an estate agency in the boom years that regularly turned over £500k, adjust your expectations to £200k - £250k and cut your costs to the bone, If you are not streamlined to this degree you will simply haemorrage money very quickly. Lettings will be a life saver for agents
Has anyone else noticed how wildly inaccurate Zoopla are with their 'current value estimates'? I can point out two current examples one £100,000 optimistic and another £80,000 less than actually achieved! Is this just me in Berkshire? Why is this acceptable when it is so misleading and unprofessional?
In a few years time property prices will rocket!
Clairvoyant Ray Evans - like everyone else!
:>) :>i ;>(
Absolutely UC, one word - SVR.
Just as well we have all that lovely wage inflation to help people pay down their debts. What's that; there isn't?
Were I bullish on property I wouldn't see much data around to substantiate my position.
Chris it seems you and i agree on one point i.e neg equity can effect sales...however the headline should worry anyone who purchased a home post 2007 with higher than an 80% LTV mortgage...they WILL be paying a lot more for there mortgage and with little chance of changing lenders. This is despite the interest rate being at its record low.....what will happen when the rates go higher?......more repos more distressed sales lower prices. Who will benefit? In my opinion FTB's and EA. One by lower prices and the other by more transactions. The people who will suffer will be the currently overstretched homeoweners. Luckily i am not one of them.
@rant n rave
You couldn't have me more wrong.
What I am suggesting and have always believed, is that people should view their property as a home; first and foremost. And if it is worth a bit more, or a bit less than last year then, as long as the bills are paid, so what?
A rising market hurts one sector of the market, a falling market another. Life goes on.
What doesn't help is hyped up headlines that frighten people who have no need to be frightened
@Stuart Warnock
You wrote: "The Banks do have a "Tap" that they can turn on and off. The money supply available for mortgage lending comes from interbank lending. Once the banks lend to each other the money supply increases. Banks only need to keep a small percentage of deposited funds and can lend the rest about 90 % "
Yes, we all understand Fractional Reserve Banking. But banks have to maintain some capital - therefore the growth of credit is ultimately limited by the money on deposit.
The use of instruments like MBSs and CDOs (and a hundred other acronyms for lending the same money over and over again) meant that the banks, during the lending orgy between (about) 1997 and 2008 put themselves in a position where they were unable to accurately the value of the assets used as security for their loans.
They avoided bank runs and bankruptcy only by the actions of the government using taxpayers' money to bail them out and using the Bank of England to provide a safe haven for 'troubled' assets.
They now HAVE to rebuild their capital - so, no, there is no credit tap waiting to be turned on if they fancy it. They turned the tap on, ran the header tank dry, ran the mains dry and ran the reservoirs dry.
@FTB Dan
I think our two posts may have crossed whilst being written ;)
You and I probably agree on a great deal but, as I am also a serving soldier at present, I cannot comment on political issues such as Greek debt or the current problems we face in the UK. I am, regrettably, going to have to end my involvement on that end of the topic
So what you're suggesting Chris is that people should treat the property they own as a home rather than a 'make-a-quick-buck' investment?
The times, they are a changin'!
@ftb Dan
I disagree with you but not from some blind estate agent viewpoint and I'm not trying to be a smartypants here but that is your definition, not an official one.
The point I'm trying to make is that terms like bust (which I take to mean literally just that: 'out of business') don't actually help anyone except the headline writer.
Zoopla's figures, such as I can find, do not put any meat on the bones of the headline. How many are in negative equity and by how much etc.?
@unhappy chappy
as you say, negative equity does affect sales but often, not as much as most people think (it can usually be covered on the next offer/ down through a chain). Most people are in negative equity are blissfully unaware of the fact because, like the vast majority of home-owners, they are not selling or re-mortgaging their property at the time
I was about a long diatribe.
But it has all been said before.
The only thing that occurred to me was "That few?"
Surely, even in the posh bits in London, for normal property (i.e. stuff that doesn't appeal to international investors) prices will be on their way down...
Negative equity relates to the amount you owe on the mortgage, not on the amount you paid for it, so I suppose that potentially what it means is that anyone who took out a 90 or 95% mortgage is in trouble.
Or the ones with second loans to pay off their credit cards?
@chris wood “I also know that there is nothing like that level of volume repossession business at present and nor do I believe there will be unless there are significant changes to the interest rate or other unseen financial upheaval.”
Chris, I work in financial services, so I know I follow the financial news closer than most. But its hardy a question of ‘unseen financial upheaval’. The upheaval is very real, Greece is bust and has been for about a year now, it is simply being propped up by the Germans, I’ve looked at their figures and take it from me, it is impossible for Greece not to default, quite impossible. There are another several European countries that would follow shortly behind. Furthermore, the UK and US are unable to pay their long terms bills and if they were companies would be declared insolvent. Debt has the world drowning right now.
Chris, I also take your point about regulations and taxes slowing the rate of renovations in an earlier post.
@Chris wood “What IS (if any) the formal definition of a housing market 'bust' in any case?”
Well based on current volumes I would suggest the market is bust right now.
If you meant what defines a HPC, it is when prices dip below their long term average, rather than being so much higher as today.
Neg Equity is a BIG problem when you come to remortgage. But this is an estate agent site so to them point its irrelevent as it does not effect sales. However it also causes chains to break down because, as some here have pointed out, often homeowners are either a) unaware they are in N.E. or b) refuse to accept they are and therefore will not budge on asking price.
@Stuart Warnock “The Banks do have a "Tap" that they can turn on and off.”
Stuart, what you are talking about would be to return to the grossly irresponsible boom days that helped create the bank crises in the first place. What happened during the last decade is all the credit worthy had their fill of debt. So the bank started lending to the less credit worthy until they would have no more and on they went until even the sub-prime were up to their eyeballs in debt.
Lending even more money t those that cannot afford to pay it back is no solution. Anyone who is credit worthy is being offered more debt than they could ever need or want, my bank wants to give me £400k!! But the credit worthy do NOT want to get up to their eyeballs in debt. Not when gravity will reassert itself soon and prices will tumble from these fantasy levels.
@ftb Dan
True, but many of those are uninhabitable and no-one has the motivation to renovate due to tax Law favouring New Builds.
The Governments figures for required housing far outweighs these figures in any case.
The market will find a way but I do not believe it will be a 'bust'
What IS (if any) the formal definition of a housing market 'bust' in any case?
The most accurate post out of EVERYTHING on here is PeeBee's. Two words - end of story.
The headline could be "Strawberrys prove popular at Wimbledon" and we would the same people, posting the same thing over and over and over.
@industry observer
a 17% increase in repossessions sounds dramatic but is just another meaningless statistic by itself. Spread across the entire UK the actual volumes are very small indeed (taking nothing away from the genuine heartache and distress that it causes for those who have suffered it through no fault of their own)
Negative equity is an entirely separate issue and does not automatically equate to repossessions. Nor does it actually cause significant effects for the majority of home-owners in that situation; in fact, most aren't even aware they are in it.
Having started my career in 1989, I spent the first few years attending many repossessions on behalf of lenders who didn't give a damn about how their former customers were being treated or, the manner/ price at which the property was eventually sold. I know from first hand experience just how devastating they can be to some families. I also know that there is nothing like that level of volume repossession business at present and nor do I believe there will be unless there are significant changes to the interest rate or other unseen financial upheaval.
@Chris wood
“ We live on an island and have a massive imbalance between supply and demand that is not being met”
This is one of those ‘facts’ that has been repeated so often everyone thinks it’s true. But it’s not in the slightest. There are an estimated 870,000 empty homes in the UK and enough empty commercial property to create 420,000 new homes. Plenty of property.
For once, for me, two words sum up the headline.
SO WHAT?
@Chris Wood
I have no idea where you get (3) from Chris but if you think negative equity is a "very small minority of people" you are living in a parallel universe.
There are two problems with NE - the obvious one is the personal tragedy that unfolds for the individual borrower. Yes maybe they over stretched themselves, maybe they didn't.
But the bigger poroblem is the overall impact on the housing market specifically and the economy generally.
Look at the other stories today - possessions up 17% first quarter - and that's before the cuts start to bite and unemployment really increases as well. Mercifully the %age is from a lower starting base than several years ago but it is the thin end start of a very long wedge.
In 1990 I spent two years on a special project for Nationwide goinfg to every LA and Hsng Assn in the south of England and explaining the Society's position on negative equity and what it was going to do about it. You know the really frightening thing, even with Mortgage Indemnity insurance for the borrower and stop loss insurance taken out by the lkender - there is no answer.
All the other posts so far are 100% spot on where this subject is concerned - we have to wake up and face up to austerity or this will drag on for years.
The Banks do have a "Tap" that they can turn on and off. The money supply available for mortgage lending comes from interbank lending. Once the banks lend to each other the money supply increases. Banks only need to keep a small percentage of deposited funds and can lend the rest about 90 %
So for £1000, deposited the bank can lend £900 this can be lent to another bank who can then lend £810 who can then lend £729 and so on. Making £1,000 worth about £10,000 to the banks - so the banks do need to start lending, this should improve next year - I hope!!!!
The simple answer is that the banks do need to start lending again and once the money supply increases mortgage products will become more competitive
Chris - those points have been debated time and time again on this forum. If someone says the UK is a small island, someone else is going to mention the case of Japan. Your points also make no mention of the massive quantities of cheap credit that has been injected into the UK property market during the last decade which is no longer there to support current prices.
1. We live on an island and have a massive imbalance between supply and demand that is not being met. Yes, volumes and lending are down but, this is a short to medium term problem. Property is still selling if not (thankfully) at breakneck runaway price speed.
2. We have cyclical periods of growth in the property market in the UK and negative equity only affects those who are getting out of the housing market totally (and the majority of those people are dead) or, are trading down market/ moving to a more expensive area.
3. Negative equity is a non story except for a very small minority of people in the UK
It is the most affected region - and don't call me Shirley.
Peterborough and much of the East of England is badly hit too. There was an article recently in the Times that said on average house prices in this area are back to 2003 levels.
@Mike, “What is to be done? I mean, seriously, what is to be done?”
Like a junky who cannot face up to going cold turkey the economy has been having one more hit, again and again, to stave off the day of reckoning a little longer. Only it had been a fear of a recession that has been staved off by ever increasing debt.
The western economies should have faced a serious recession after the boom of 2001. But monetary policy and debt was used to re-inflate the bubble, this time into houses, not dot.coms. A recession would have cleared out all the mal-investment and set the stage for real growth in productivity. Again, we should have had a far worse recession in 2009 and be done with it. But instead more and more debt was heaped up to delay the recession just a short while longer. Each time the junky shoots-up the dose needed is larger and the effect is shorter lived and the pain will ultimately be worse.
Over the last decade there has been zero rise in productivity in the UK, all the ‘GDP Growth’ has been an illusion created by debt. But debt will always catch up with you in the end. The only thing that can be done is facing up to the damage that has been done now, rather than making it any worse for ourselves.
I thought 'Under Water' was the American term for negative equity? Those who bought from 2006 on might have seen the price of their property go down, but that doesn't mean all their equity has been wiped out too (yet...).
And shirley the region most affected is Northern Ireland, where prices are a whisker above 50% down from 07 peaks?
Oh dear, oh dear, oh dear.
And that's at the lowest bank base rate in 300 years.
It looks as though Greece will default sparking another bank crisis and credit crunch - according to the 'experts' on Newsnight last night.
What is to be done? I mean, seriously, what is to be done? And don't say 'the banks must start lending again' as though it's a tap they can turn on and off. That cannot, and will not, happen.
I have to say if I had a lot of money in the bank at the moment, I'd be tempted to take it out and buy gold.