Obsession with property now bearing negative fruit

17 2008
British homeowners are now being brought down to earth with a bump as the market undergoes a severe correction, according to a leading independent financial adviser.

Over the past decade, consistently increasing prices have brought widespread obsession with property, with houses being viewed as cash cows or investment vehicles.

The desire to use homes in this way - mainly through releasing equity to provide additional income - has apparently clouded the fact that price falls or even a crash could be just around the corner.

As Tom McPhail, pensions research manager at Hargreaves Lansdown, said: "People were attracted by the apparent upward one-way bet on property."

However, the picture has changed dramatically, with first-time buyers now steering clear of the market as lenders are now asking for 13 per cent deposits on average, a three-year high.

The rental market looks set to be a safer bet for the foreseeable future as homeowners start to feel the strain, with 1.5 million expected to be forced to remortgage in 2008 alone and consumer confidence at an 18-year low.

This reversal of fortunes is underlined by the fact that £7 billion worth of equity was withdrawn between October and December last year, compared to £13.7 billion for the same period in 2006.
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