Homeowner that bought properties within last four years could face capital loss
May 14, 2008
According to a recent report homeowners that purchased their properties under four years ago are worst placed to face capital losses from the effects of the ongoing house price falls, as many will have paid a fortune for their homes by could see the value of the property plummet in a relatively short period of time. However, experts have stated that whilst this group is most likely to face capital losses due to falling house prices not all will face negative equity depending on how much deposit they put down on the property when they took out their mortgage.
Some industry officials have predicted that house prices could fall by up to 20% over the next couple of years, and those that purchased properties in the last few years when house prices were sky high are likely to take the hit harder than others. It is thought that house prices could fall to an average £153,400 from an average £196,000, and this means that property values would be at the same level as they were in spring 2004.
One industry official said: “It is vital to differentiate between capital loss and negative equity. While a capital loss is beyond the control of homeowners, mortgage borrowers can overcome negative equity by reducing the size of their outstanding mortgage compared to the value of the property.”
Over recent months house prices have been falling, and a recent report showed that property prices were now lower than they were a year ago, which signifies an end to the decade long housing boom that has taken place in the UK.
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