Your home was "best before" April 2004

In January, Fool.co.uk predicted that house prices would fall 20% this year slashing the average price of a home in Britain from £196,000 to £153,400. We still maintain that property values will revert to mean.

Homeowners who bought before spring 2004 are sitting pretty

A 20% fall in house prices will bring down the average price of a house in the UK to spring 2004 levels. So, anyone who bought a home after then will find they have made a capital loss. Put another way: their home was "best before" April 2004 because it will be worth less than four years ago.

This does not mean they are in negative equity because negative equity is related to the size of a loan taken out to buy a property. A capital gain or loss is solely a function of the price of an asset.

The West Country is most vulnerable to a property downturn

People in the South West had to have bought their homes earlier than the national best-before date to sidestep a 20% fall in property prices. They should have bought their homes before January 2004. In the winter of 2003, the average price of a home in the region was £163,000, which is approximately a fifth less than the average price today.

East Midlands and the South East also fare badly. Homeowners in the East Midlands who bought their properties after January 2004 are some of the most likely to incur a capital loss. The best-before date for the South East is also January 2004.

The luck of the Irish and the canny Scots

The best-before dates for Scotland and Northern Ireland are April and October 2006 respectively - some two years later than the national average. Since spring 2004, property prices in Northern Ireland and Scotland have more than doubled compared to a 20% increase nationally.

David Kuo, Head of Personal Finance at Fool.co.uk, says: "A 20% fall in house prices will mean that many people who bought their homes after spring 2004 will suffer a capital loss.

"It is vital to differentiate between capital loss and negative equity. While a capital loss is beyond the control of homeowners, mortgage borrowers can overcome negative equity by reducing the size of their outstanding mortgage compared to the value of the property.

"It is also important to appreciate that falling house prices are not disastrous, even for many existing homeowners. A 20% fall in house prices across the board will narrow the gap between the value of your home and a property further up the housing ladder. It will make up-sizing more affordable.

"Fool.co.uk therefore urges the Government to stop meddling in the housing market, and allow property prices to find their own levels. In its attempts to help homeowners, it is killing with kindness. It is holding back a dynamic market that needs to fall as well as rise to move forward."