Are you facing a capital loss on your home?

By Jennifer Hill

LONDON (Reuters) - Houses bought four years ago or more are best placed to weather the property market downturn, research shows.

Personal finance website Fool.co.uk expects property prices to tumble 20 percent this year, taking the average British property value to 153,400 pounds from 196,000 pounds -- the same level as spring 2004 levels.

That means that, on average, people who have bought since then will be sitting on a capital loss. Not all, however, will face negative equity, as some will have taken out a mortgage of less than 100 percent or more of the purchase price.

"It is vital to differentiate between capital loss and negative equity," said David Kuo, head of personal finance at Fool.co.uk.

"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."

He added that falling house prices were not "disastrous", as they would narrow the gap between the value of a property and those further up the housing ladder, making up-sizing more affordable.

The West Country is most vulnerable to a property downturn, while those in Scotland and Ireland are the least so, the figures show, as prices there have more than doubled in the past four years, compared to a 20 percent increase nationally.

House prices have been falling on a monthly basis since the end of last year as the credit squeeze has exacerbated affordability pressures after a decade-long boom.