In addition to the fear over negative equity in the British property market a new reason for concern is emerging. The economic slowdown has heralded a wave of forced property sales that could yet tip a downturn in real estate markets into a 1990s-style property crash. 

Some new buildings could be left empty, while others could be taken over by creditors, causing the all-too familiar drag effect that haunted the industry for more than a decade last time around. 

Insolvency experts are also gearing up for an expected surge in commercial property-related business, even though any debt-related distress has so far been limited to overstretched buy-to-let speculators and regional residential developers. 

The speed of the correction in property prices since the market peaked a year ago has been far faster than the last property crash nearly 20 years ago, with commercial real estate values down by a fifth and house prices almost 10 percent down. 

UK economic growth slowed to 0.3 percent quarter-on-quarter in the first three months of 2008 and is expected to have fallen lower again in the second quarter. 

The ensuing damage has been manageable to date, partly due to the lessons learned during Britain’s last property crash. Tighter regulation and changed attitudes mean UK banks are less aggressive than they used to be when it comes to clamping down on problem home loans. 

Property developers have also been more disciplined than in the early 1990s, leading to a greater balance between supply and demand that reduced the potential for a massive overhang of new buildings that might take years to work off. 

However, there is likely to be at least some forced selling of UK property in the next few years.

The government has just announced a raft of measures designed to breathe some life into the housing market, primary of which is a “rent first, buy later” scheme. 

The pilot project will be open to some in
England with household earnings under £60,000. They would rent the property at a discounted rate for two or three years, with an option to buy part of it.  

A first-time buyer couple on low incomes must save a year’s worth of their take-home pay to buy their first home, the Royal Institution of Chartered Surveyors (Rics) said last week.  

A couple in the bottom quarter of earners in the UK would need £27,738 to pay the upfront fees even before paying any of their mortgage, Rics said. Under the government’s plans, households earning £60,000 or less would be able to rent at 80% or less of the going rate for two or three years in order to save up for a deposit.  

They would have an option to buy 25% or more of the property at any time under the scheme, called Rent to Home Buy. The government had previously extended the shared ownership scheme from key workers to those households earning £60,000 or less.  

The government hopes that this scheme, alongside others, will help 75,000 first-time buyer households on to the property ladder.

It is worth noting, however, that the scheme is only open to residents of
England, with other parts of the
UK currently left out despite fears about the property market extending right across the country.