Britons To Lose Equivalent Of Average Annual Salary Off Home

British homeowners are expected to lose the equivalent of a years pay off the value

of their property by end of next year, figures from the building society Nationwide reveal.

Economists around the country seem to be one in warning about a bleak prognosis for the nations economy for the rest of 2010 with continued high unemployment, a stagnating mortgage lending and low property prices.

Nationwide reports that typical house values dropped 0.9% in August following a 0.5% drop in July. As of June, annual inflation rate is down to 8.7% from 9.8% last year. It is down again by another 3.9% in August.

The decline in prices followed a short lived property boom last year amidst a shortage of housing properties. Those increases continued up to the first three months of the year. Chief property economist at Capital Economics Ed Stansfield admits that The rebound in house prices lacked any firm foundation. He forecasts that home property prices will decline 5% this year and a further drop by 10% in 2011.

True enough, right after abolishing the Home Information Packs (HIPs), property prices started falling as more houses property came into the markets but without any increase in demand since the start of 2010. Today, supply has basically outstripped the demand in many parts of the country.

A typical house cost 163,000 at the start of 2010 and is expected to lose 23,000 by the end of next year. Thats roughly the equivalent of an average workers annual net take home pay.

Mr. Stansfield further adds that 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.

Despite a cut in interest rates which brings mortgage rates at their lowest in 10 years, there are simply few borrowers. But the banks are not helping at all as they continue to lend only to their most credit-worthy clients. Mortgage credit conditions continue to tighten which further aggravates the lack of market demand for an increasing supply of houses for sale.

Richard Hatch, the head of residential at estate agents Carter Jonas, said that as of last year, there was a major disconnect between the property market and the economy as house prices rose at a rate that was simply unsustainable and a degree of correction was always on the cards.

He adds that an increase in the number of properties for sale particularly at the low end of the market demographics has simply outstripped demand that has been discouraged by difficulties in getting mortgage financing especially from first time home buyers. This now comes after an early warning from economists to expect a double dip in property prices

The Bank of England recently released its July economic figures which revealed that only 48,722 mortgage loans were approved by banks for home purchase purposes for the month. This is just about inline with the expectations of economists consistent with the forecasted decline in house prices.

by: Simon Drew

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