The homeowners’ nightmare of selling their property at a loss became a reality last year for more sellers in Newcastle, Nottingham and Durham than anywhere else, according to FT research.

In these areas, one in 20 homes were sold in 2008 for less than they were bought – rounding off a grim year for the housing market.

The fact that larger proportions of properties were sold at a loss in the north-east suggests that there could be a Northern Rock effect. Prices in the region were among the strongest performers in 2003 to 2005, as the main local lender chased market share, but have been among the weakest in the past two years.

The north-east’s five postcode areas – Newcastle, Durham, Sunderland, Cleveland and Darlington – are all in the 25 per cent of areas with the highest proportion of properties sold at a loss.

Nationally, prices are now back to where they were in early 2007. But in the north-east, they are back to mid-2006 levels, suggesting that a greater proportion of transactions could be “under water”. Anyone selling a home bought in the past two years is, on average, at risk of having to sell at a loss.

In the areas where the greatest proportion of sales has realised a loss, the average loss has been around 10 per cent of the purchase price. In Newcastle, for example, where 340 property sales have realised a loss, the average loss has been £14,000 on the original average purchase price of £140,000. Most of the losses will be smaller than that, as the average is skewed by sales of larger properties with larger losses.

The FT analysis, based on information from UKValuation, a property data and valuation business, used Land Registry figures that record the selling price of every property in England and Wales. The previous selling price was identified for every property sold between January and the autumn. There is little incentive for conveyancers to submit the paperwork after a property sale, so it can be several months before the bulk of transactions for any period are recorded. The figures cover about 75 per cent of the year’s expected sales. The full year’s picture will not be clear for some months.

While damaging for those involved, only 10,000 of the 350,000 recorded property sales in 2008 were sold at a loss. That equates to nearly 3 per cent, but the proportion has risen close to 5 per cent in recent months as the squeeze on the market tightens. It seems inevitable that the proportion will increase in 2009. But with the number of transactions currently so low – less than half the monthly levels of a year ago – the actual number of losses realised will rise only slowly. Further significant price reductions and a pick-up in sales would see the realised losses rise sharply.

The areas where the smallest proportion of properties have been sold at a loss are predominantly around the South East. In Slough, Kingston upon Thames and Redhill, only one in 70 homes sold was done so at a loss – less than a third the proportion in Newcastle.

This mainly reflects the greater buoyancy of the market in the South East in 2007 – up by 13 per cent – compared with the 3 per cent rise during the year in northern England. The price declines in all regions seen so far for 2008 have been broadly comparable at between 6 and 9 per cent.

Evidence that losses on home sales were more frequent in northern England might suggest that homebuyers with lower incomes and high loan-to-value ratios had fewer alternatives when they struggled to meet mortgage payments, said Malcolm Barr, an economist at JPMorgan. In the South East and London, “more of the people have more of a buffer to go if they lose their job”, he said. In poorer parts of the country, losing a job might mean that a homeowner could not keep servicing their mortgage.

Across England and Wales, relatively few households – 10,000 or around one in every 2,500 – have had to lock in a loss on a property sale, though that number is expected to increase sharply next year as more families try to sell in the face of weak prices. In some areas, such as Lincoln, Swindon and Northampton, the number of households that have already locked in a loss is higher at around one in 1,000. Not all of those who have sold at a loss will have acquired negative equity.

Additional analysis by Michael Jacobs and Daniel Pimlott