Another four years of negative equity for many

People who bought a property in England at the peak of the market in 2007 will have to wait until 2014 before emerging from negative equity, according to a report by the National Housing Federation.

Independent forecasts in the study Home Truths 2010 have shown people who bought at the height of the boom paid on average 216,800 and this will have risen to 226,900 by 2014. The report also predicted a 22 per cent rise in house prices over a five-year period to 2014, fuelled by an under-supply of new housing.

In 2009/10, it said, just 87,360 new homes were started in England, producing only enough homes for a third of the new households forming each year.

The federation said it feared an "entire generation" of people would be locked out of the housing market as a result of high house prices.

It added that the shortage of social housing will leave those shut out of the home ownership market with "little realistic chance" of obtaining a social home.

More than 1.76 million households, or the equivalent of 4.5 million people, were on social housing waiting lists in 2009, a 23 per cent increase in the last five years, according to its figures.

Federation chief executive David Orr said: "Even though price rises look sluggish for the next few years, affordability is not improving for many low-to-middle income households as banks continue to restrict their mortgage lending and house prices remain historically expensive in relation to salaries.

"There's a very real risk that an entire generation will be locked out of the housing market for the foreseeable future and people will increasingly look to buy or rent an affordable home instead.

"But the Government's decision to scrap regional house building targets, withdraw funding for new affordable housing schemes and to cut budgets means the future looks bleaker than ever for millions of people currently stuck on waiting lists."

n The number of people looking to buy their first home fell sharply during the past year, research indicated.

Only 22 per cent of potential buyers were looking to purchase their first home in July, down from 31 per cent during the same month of 2009, according to property website Rightmove.co.uk

The group warned that the proportion of first-time buyers was half the level needed for a healthy housing market.

Miles Shipside, director of Rightmove, said: "With the number of prospective buyers at the bottom of the chain being half of normal levels, the question sellers further up the chain will be asking is 'who will be at the bottom of my chain?'"

The availability of mortgages continued to be people's main concern about buying a home, with 55 per cent of first-time buyers saying mortgage-related issues, such as raising a deposit, were among their biggest worries.

But people were less concerned about house price falls.