Britain on ‘edge of worst house price collapse since 1990s’ as experts warn property value could plunge by 40% – but that’s good news for first-time buyers
This has raised alarms about whether we could see a return of "negative equity"
BRITAIN is on the edge of a property price crash which could be as bad as the collapse in the 1990s according to experts who are also warning property value could plunge by 40 per cent.
This has raised alarms about whether we could see a return of "negative equity" which is when a house falls so much in value it is worth less than the mortgage.
Around one million people were hit with negative equity in the 1990s, .
Paul Cheshire, professor of Economic Geography at the London School of Economics, said: "We are due a significant correction in house prices.
"I think we are beginning to see signs that correction may be starting."
Prices plunged by 37 per cent in 1989 when the price boom fell apart.
In its most recent figures, The National Association of Estate Agents reported the number of homes sold in May for less than the asking price rose to 77 per cent.
Prof Chesire added that falls in real incomes is also likely to spark for a fall in house prices.
Inflation jumped to 2.9 per cent in May as British households faced further squeezes.
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However it might not all be bad news as a fall in house prices provides a glimmer of hope for first time buyers who may be able to soon make that first important step on to the property ladder.
David Hollingworth of broker London & Country Mortgages said last month: “First time buyers have felt the brunt of rapidly rising high prices and the need for big deposits.
“A slowing in the growth in prices will give them a chance to build their deposit rather than watch prices rise at a faster rate than they could manage to save.”
It was reported however this week how house prices in the UK had bounced back which erased a decline recorded over the previous three months.
Nationwide, one of the biggest mortgage providers, said that house prices increased by an average of about 1.1 per cent in June – the first rise in four months.
The building society's chief economist warned however that monthly growth rates can be “volatile, even after accounting seasonal effects.”
However Nationwide also reported earlier this month - three successive monthly falls in house prices for the first time since 2009 – the peak of the financial crisis.
Prices fell 0.2 per cent in May, 0.4 per cent in April, and 0.3 per cent in March.
Rival bank Halifax said house price growth slipped to a four-year low in May.
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