Thousands of homeowners who bought during the housing boom face another four years of being trapped in negative equity, according to the National Housing Federation.
Homeowners who purchased property in the peak of the market in 2007 paid an average price of £216,800. But these people will have to wait until around 2014 – when average prices are predicted to hit £226,900 – before they recover what they paid for their homes at the time.
Independent economists Oxford Economics forecast house prices would increase 22 per cent over the next five years, fuelled by an under supply of new housing.
According to the research, house prices will rise 7.5 per cent this year, but will then fall again in 2011 by 3 per cent, before recording a modest increase of 0.9 per cent in 2012. It says house prices will then increase by 4 per cent in 2013 and 5.4 per cent in 2014.
Federation chief executive David Orr said: “For those who bought at the peak of the housing boom, there’s a strong possibility that they will have to wait another four years before their home is actually worth what they paid for it.
“But house prices will inevitably increase in the long term because of huge under-supply of housing. Even though price rises look sluggish for the next few years, affordability is not improving for many low-to-middle income households – as banks continue to restrict their mortgage lending and house prices remain historically expensive in relation to salaries.
“There’s a very real risk that an entire generation will be locked out of the housing market for the foreseeable future and people will increasingly look to buy or rent an affordable home instead.”