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Negative equity curse 'will last until 2014' 31 August 2010
Becky Barrow (about the author)

Tens of thousands of people who bought a home at the peak of the market will remain trapped in negative equity until 2014, a report warns today.

Official figures show around 1.3m bought a property in England in 2007 when prices reached an all-time high. Their home is worth less than they paid for it and will remain so for another four years, according to the report from the National Housing Federation.

It says a significant minority are in negative equity, with a mortgage bigger than the value of their property, giving them problems if they have to sell. The report warns that Britain is 'in the midst of the worst housing crisis for generations' and that house prices will fall again next year.

The federation, which represents England's housing associations, raises fears that 'an entire generation of people will be locked out of the housing market as a result of high house prices'.

First time buyers slump

The number of first-time buyers slumped to just 199,000 last year, compared with nearly 600,000 in 1999. Only the rich, the well-paid or those with generous parents are able to get on today's property ladder.

The plight of those who bought in 2007 is highlighted in figures showing that the average house price in England then of £216,800 has fallen to £210,500.

The figures, compiled by the consultancy Oxford Economics for the federation, predict it will drop to £204,200 in 2011, rising to £206,400 in 2012 and £214,900 in 2013.

It will not be higher than the 2007 price until 2014, when it will hit £226,900.

The situation is even worse in some parts of the country. In the North-East, the peak price of £148,100 will not return until 2015. In places such as London, the East and the South-East, where demand for housing is more intense, prices will be back to peak levels by 2013.

David Orr, the federation's chief executive, said: 'For those who bought at the peak of the housing boom, there is a strong possibility they will have to wait another four years before their home is worth what they paid for it.

'For a significant minority in negative equity the consequences are devastating. They have a major problem if they need to sell.' The report, Home Truths, says the problems facing people who bought in 2007 are overshadowed by the greater crisis in the housing market.

House prices are around 120% higher than they were a decade ago, which is keeping a growing number of people off the ladder.

Construction began on just 87,360 new homes in England in 2009/10, a third of the number of new households which are forming.

Source: This is Money