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Hundreds of homes sold at a loss as the crash gathers pace
Sri Carmichael, Consumer Affairs Reporter07.01.09
HUNDREDS of Londoners have been forced to sell their home at a loss for the first time in more than a decade as house prices continue to plummet.
Last year 535 houses and flats were sold in the capital for less than their purchase price, according to Land Registry figures.
The last time people faced this harsh reality was in the mid-Nineties during the previous housing market crash.
Property experts today predicted the housing losses that have emerged in London so far are "just the tip of the iceberg".
Tens of thousands of people who are hoping to sell own homes worth less than they paid for them. Most have so far refused to take the reduction, holding out for a better offer or delaying their move. But many of them will be forced to sell at a loss.
The recession is predicted to drag home values down to levels seen as far back as six years ago.
Unemployment and higher mortgage rates will also force increasing numbers of people to sell.
Already, more than 330,000 homes in London are worth less than they were bought for, according to the Halifax index, and that figure is rising by several hundred every day, a shock after more than a decade of rising property prices.
The reluctance of homeowners to face up to the collapse in values has paralysed the housing market.
Last year one in 50 or 2.2 per cent of the 24,398 homes sold in the capital made a loss but that proportion is expected to rise steadily in the coming months. The final picture for last year could even be worse as some of the homes sold in the closing months will not yet have been recorded with the Land Registry because paperwork can be submitted several months after a sale.
South-west London and east London saw the most number of homes sold at a loss. But in terms of loss-making deals as a percentage of total sales, north-west and west London recorded the grimmest figures, at 4.4 per cent and 3.5 per cent respectively.
Across London the property market crashed by 15 per cent last year, according to yesterday's figures from the Nationwide, taking the average value of a home in the capital back to summer 2006 values.
Analysts predict the market will deteriorate further this year with forecasts ranging from five per cent to the most bearish 20 per cent drop in prices.
Seema Shah, property economist at Capital Economics, said: "What we saw last year was just the tip of the iceberg.
"There are many more people sitting on losses who will be forced to sell because they need to move or they are made redundant and can't afford the mortgage payments.
"There's anecdotal evidence that people are not facing up to the loss and renting out their property rather than selling. It's great if you can sit it out until prices rise but that's not possible for many."
She predicted prices would drop throughout this year and early next year to levels seen towards the end of 2002 before they begin to pick up.
"This year is going to be as bad, if not slightly worse, than last year," she said.
"It's been ingrained for years that buying property is a one-way bet, but people are slowly getting used to the concept of making a loss."
Not everyone who sold at a loss will have fallen into negative equity, but this is dependent on the size of their mortgage and how much they had paid off.
Reader views (20)
R.A.Brinsden - nearly correct. Barclays are the only bank not to have taken money from the Government. The others that did had no choice.
- Dan, Manchester
How can a crash "gather pace"?
- M, London
I'm still waiting to afford a studio flat in London, and a one bedroom seems as far away as the moon. Keep coming down. 99K - 125 should do it. in the meantime, I am still saving.
- Mari, London. UK
I think crisis in the house market will least till the end of 2009 begin 2010.. olimpic games in london may help exspecially in east london.
- Marco Davies, London
Can we all wake up and smell the coffee,the price crash is good for the housing market.The reason being that young people are the foundation of the housing market,and unless they can get on the housing ladder they have got much further to climb.This is not rocket science just simple mathematics which our illustrious politicians seem unable or unwilling to grasp.
Whilst on the subject of the crecit crisis why is it that Barclays are still sponsoring the premiership as are major institutions sponsoring Golf,Tennis et.etc.with taxpayers money,answers on a personalised expensive bank postcard.
- R.A.Brinsden, Greenfield,England
I rent a house in Florida for business. Landlord has just gone in to foreclosure and the bank have told us we can stay RENT FREE as long as we don't trash the place. They will give us at least one months notice IF a buyer is found. The property sold for $300K two years ago and the bank "indicated" that they would look at offers around $130K!! This is the UK soon. I will buy it for less than $100K I kid you not.
- Allan Gregory, Warwick RI USA
Once prices fall by 40% i should then be able to only then just about afford a well below average property on my well over average wage, its craz the way propery prices have been able to be ramped up to these levels.
- Charlie, South London
This time next year we'll be 40% down from the top, I may think about it then Dave.
Job losses everywhere and everyone else fearing a P45 = no buyers.
- Nick, london
House prices in London (West end particularly) have been overpriced for several years, driven by the bonuses paid out in the city. Now that there is an apparent dearth of these bonuses accompanied by increasing unemployment, where else have house prices to go but down ?
It is important that this realignment is allowed to take place quickly to get some stability back into the system. Overvalued assets and too much easy credit is responsible for all of this, the sooner common sense prevails the better for all of us!
- Toonken, Newcastle upon Tyne
What a time it was to oblige us to get HIPS reports?!
- Georgie, Islington, London
Dave - i am very pleased, let's hope they drop another 20%.
- Bobby Gillespie, SE1, London
At last prices are starting to get more affordable.
- Neil, Milton Keynes
Going back to 2002 are we? Let's try going back to mid nineties when all this madness started. That would put a 3 bed semi in London for under 100K. Yes, you read that right 100K. The funding has been cut off for housing in the global markets - there is a depression on the way - and the masses now are saddled with student loans, cell phone bills, higher levels of taxation, and less jobs than there were in 90s. So buckle up and enjoy the ride down unless you have saddled yourself with a huge mortgage in a coma thinking you "actually" own your house - which you do not! Reality can be a real bitch sometimes.
- Andy Link, Wickford
Sadly, Dave Davies, those who spent to last 3 years moaning about not being able to afford a home might just be a little annoyed that the economy is now collapsing under the weight of a burst credit bubble for which they are pretty much the only blameless party.
- Dylan, Rossendale, UK
It's about bloody time house prices are falling to realistic and affordable levels! All those that are refusing to sell for less than what they paid for will be waiting a long time before sensible buyers will pay their asking price. This is no longer a seller's market...it's a buyer's market!
- Ali Sichilongo, London
Not yet mate, not yet. Another 40% should do it.
- Shindigger, london
Anyone who didn't see this coming is a fool.
50% falls from last year's peak now a certainty.
- Cp, London, UK
When a one-bed flat in London drops to 99K I'll buy one.
- Neil, london uk,
thanks to unregulated estate agents and irresponsible bank lending houses are way overvalued.
- Tony Gray, east grinstead. west sussex
All of you who spent that last 3 years moaning about not being able to afford a home should now be pleased.
Any takers?
- Dave Davies, Basingstoke
