Londoners forced to sell homes at a loss

London: Hundreds of Londoners have been forced to sell their home at a loss for the first time in more than a decade as house prices continue to plummet.

Last year 535 houses and flats were sold in the capital for less than their purchase price, according to Land Registry figures.

The last time people faced this harsh reality was in the mid-Nineties during the previous housing market crash.

Property experts predicted the losses that have emerged so far are "just the tip of the iceberg".

Tens of thousands of people who are hoping to sell own homes worth less than they paid. Most have so far refused to take the reduction, holding out for a better offer or delaying their move. But many will be forced to sell at a loss.

The recession is predicted to drag home values down to levels seen as far back as six years ago, while unemployment and higher mortgage rates for those coming to the end of fixed-rate deals will force increasing numbers to sell.

Already, more than 330,000 homes in London are worth less than they were bought for, according to the Halifax index, and that figure is rising by several hundred every day, a shock after more than a decade of rising property prices.

The reluctance of homeowners to face up to the collapse in values has paralysed the housing market.

Last year one in 50 or 2.2 per cent of the 24,398 homes sold in the capital made a loss but that proportion is expected to rise steadily in the coming months.

The final picture for last year could even be worse as some of the homes sold in the closing months will not yet have been recorded with the Land Registry.

South-west London and east London saw the most homes sold at a loss. But in terms of loss-making deals as a percentage of total sales, north-west and west London recorded the grimmest figures, at 4.4 per cent and 3.5 per cent respectively.

Across London the property market crashed by 15 per cent last year, according to yesterday's figures from the Nationwide, taking the average price back to summer 2006 levels.

Analysts predict the market will deteriorate further this year with forecasts ranging from five per cent to the most bearish 20 per cent drop in prices.

Seema Shah, property economist at Capital Economics, said: "What we saw last year was just the tip of the iceberg. There are many more people sitting on losses who will be forced to sell because they need to move or they are made redundant and can't afford the mortgage payments.

"There's anecdotal evidence that people are not facing up to the loss and renting out their property rather than selling.