1 in 20 homes sold at loss
Monday, 27 October 2008 6:04 PM
One in 20 homes are now being sold at a loss as house prices continue to dive.
Research by UKValuation for Financial Times shows the number of homeowners being forced to sell up remains low, but is no longer uncommon with a £200 million loss for sellers expected this year.
Research by Hometrack released today shows house prices have now fallen to March 2006 levels - suggesting those making losses on property deals are recent buyers over the last two years, or those being forced to sell quickly.
UK house prices have doubled since 2000 - so most owners will be insulated from house price drops, but for recent buyers negative equity is remaining a threat.
A total of 1,500 homes in August - or five per cent of all sales - were sold for less than they were bought for, the research shows.
This compares with 1.5 per cent of sales a year ago - or 1,200 homes a month at a time with the volume of property sales was much higher.
Research for Capital Economics points to a further 25 per cent cut in house prices lasting into early 2010.
In total this represents a 35 per cent fall in house prices from the peak in the market last year.
However, the body does not expect the recession to batter house prices further - will falling interest rates helping to support the sector.
The slowdown in the property market was highlighted last week with data from the National Association of Estate Agents (NAEA) showing the average estate agent made just six sales last month, up from five in August.
Richard Hair, a former president of NAEA, explained the issue of property owners selling at a loss mainly came from the buy-to-let market - and less so from owner-occupiers.
"Some buy-to-let investors were mortgaged up to the hilt and now find themselves in negative equity," he said.
"Most comfortable owners have no urgency to sell."
He added those who are selling are now finding themselves with the conundrum of how to be competitive.
"Sellers have to ask themselves about being at a competitive price to put themselves ahead of the competition," he said.
With fewer buyers around, sellers are being forced to realise a good price now may not be so attractive in six weeks time, Mr Hair explained.
This means choosing to knock an extra ten per cent off now to make a quick sale or finding it is necessary to cut a sale price even further if a deal is not secured six months down the line.
Andrew Goundry, an estate agent from Cornwall, said: "Price remains the main factor in securing a sale.
"Evidence clearly points to sales happening quickly where a sensible initial asking price is set. There are buyers out there across all price ranges, but with the current economic climate and continued high profile in the media, they are only interested in property that looks good value for money."
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