Homeowners are substantially underestimating the decline in value of their properties, according to a new survey. While home values have fallen by at least 6% in the last three months, homeowners believe that the value of their homes has dropped by a mere 0.1%.
Younger are more confused
Younger homeowners appear to be switching off the news programmes, as most under 34 are convinced that their houses are continuing to appreciate - despite all the evidence to the contrary.
The average younger property owner estimates their home to be worth over £2,000 more now than it was three months ago. In reality it is likely to be valued at about £7,000 less.
There is a greater awareness amongst London homeowners of the state of the property market. They estimate their homes to have fallen in value by an average £46,000 - a more realistic assumption.
Market affected by perceptions
"It is worrying just how much we are underestimating house price falls," says Karen Barrett, marketing director of Impartial.co.uk, which commissioned the survey. Homeowners should face up to reality and recognise that their homes are not merely an investment, she suggests.
The perception demonstrated by the survey may help to explain why the property market has become so inactive - sellers have been unrealistic in recent months about what their homes may sell for. Recent evidence from the Royal Institution of Chartered Surveyors (RICS) suggests that homeowners are beginning to recognise the reduced value of their homes on the open market.
Farewell, accidental landlord
This interpretation of events has been backed by selling agents Cluttons, which reports a surge in sales from property owners who have turned to letting their homes after they found they were unable to sell at what they regarded was an acceptable price. Many of these 'accidental landlords' are now willing to sell in line with new market realities, say the agents.
"Those people who need to sell their homes are realising it is not an option to sit tight and wait for prices to recover," says James Hyman, a partner at Cluttons. "This is good news for the sales market, which has been stalled in part by the reluctance of sellers to recognise that their homes are worth considerably less than they were a year ago.
"Many sellers, who are not in a position to rent their property out in the long-term, are now accepting that they are better off selling at current prices, as the market is unlikely to recover to previous heights for some considerable time. There are plenty of buyers out there at the right price, especially in the mid-market, with large enough deposits to access finance and there are deals to be done with reasonable sellers."