But there are marked differences across Britain. In the outer South-east, 41 per cent of recent buyers are affected by negative equity, but the figure is only 5 per cent in Scotland.
The study, conducted October to October, by the Joseph Rowntree Foundation, which conducts research into social policy, is an update on a similar survey last year.
The proportion of those with negative equity has increased because house prices fell in the year to October. Prices fell dramatically in the last quarter of 1992 and then recovered slightly.
Virtually all the people suffering from negative equity bought their properties between 1988 and 1991. Of this group, one in 10 had negative equity in October 1991, one in five in October 1992, and one in four by October 1993.
Today's report also shows that younger buyers and those whose loans represented a high proportion of the original purchase price are hardest hit by negative equity: 48 per cent of recent buyers who bought when aged between 20 and 24 now hold negative equity, compared to only 8 per cent of those who were older than 50 when they bought.
Over two-thirds of those who bought during the late Eighties boom with a 95 per cent or higher mortgage are now affected compared with half in October 1992.
This new research has been undertaken by Daniel Dorling, of the University of Newcastle upon Tyne. He said yesterday: 'The problem of negative equity would begin to disappear if house inflation returned. But this could take several years. There is also no guarantee that house prices would rise evenly for all those affected.
'Indeed, even if prices rose by 25 per cent over the next three years, many in the South- east would still have negative equity. The market will not, therefore, be able to solve this problem on its own and more positive action is required.'
The study says that the more entrenched the problem becomes, the more sustained the price rises would need to be to free those people who cannot move home. 'It is the length of time people cannot afford to move that is important. Negative equity affects particular groups of people in certain areas very severely. There is no likely short-term solution to their problems, which stem largely from having needed to buy a home at the wrong time in the wrong place.'
The national average of negative equity held by recent buyers has risen from pounds 3,600 in October 1991, to pounds 4,400 in October 1992, and pounds 4,800 in October 1993. In Greater London, people hold on average, pounds 5,300 per household of unsecured mortgage debt, whereas a year ago the figure was pounds 5,500.
Housing Research Findings, No 101; from the Joseph Rowntree Foundation, The Homestead, 40 Water End, York YO3 6LP; free.
(Chart omitted)Reuse content