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The average price of a home in ‘middle Britain’ by Christmas 2008
will have dropped £40K from its peak, a group of economists, psychologists
and finance industry experts has warned today.
Such a fall would equate to a fall of more than 18% off middle
Britain property prices, according to AXA’s ‘Financial Taskforce’.
This would leave middle Britain – defined as households with an
income of between £40,000 and £100,000 a year – seriously exposed to
the risk of negative equity.
The taskforce calculates that a ‘typical middle Britain’
household that bought a home in March of this year might now have only £15,000
worth of equity left in their property – equivalent to just 9 per cent
its value.
The AXA taskforce was created earlier this year with a view
‘to investigating the financial problems facing Middle Britain and
what steps can be taken to solve them.’ It includes representatives
from economics consultancy Centre for Economic & Business Research (CEBR)
and financial psychology specialist Design Technology, as well from its
main sponsor, insurer AXA.
Steve Folkard, head of savings and pensions policy at AXA and a
member of the taskforce, predicted a ‘very tough 18 months for middle
Britain's housing market’. ‘Middle Britain may have managed to
weather the storm before now, but that resilience is being seriously
tested by the ongoing effects of the credit crunch,’ he said.
‘Negative equity is something most of us will remember from the early 1990s
and there's nothing to suggest that Middle Britain will be caught up in
a crisis of that magnitude. However if you bought a home earlier this
year you should bear in mind that the equity you have in that property
could go down before it goes up.’
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