The dictionary definition of the word Equity is b the quality of being fair or impartialb . In the context of finance, Equity relates to the monetary value of a property or business above and beyond any amounts owed on it in mortgages, debts and other claims.
Most people use equity to refer this value that they hold in their property. Hence the term Negative Equity refers to unfortunate situation where debts owed on a property are greater than the current value of the property.
Baby Boomers and Equity
It is estimated that the baby boomers (those born after the end of the Second World War) are sitting on a large amount of Equity in their homes, as house prices have risen dramatically over the last 60 years. Some estimate put the figure at around B#1 trillion. Many of these individuals may be planning to fund their retirements by selling their homes and downsizing, as many may not have made adequate provision for their retirement.
If this were to happen en masse, than the very situation that they have benefitted from (rising house prices) may be adversely effected as prices are driven down by a steady stream of sellers in the property market.
Similarly, something that may not seem particularly fair is that those baby boomers fortunate enough to be sitting on Equity are able to support their children and grandchildren through funding deposits on houses, paying for university fees and so on… and again adding fuel to the property market.
Hopefully this will answer some of the questions arising from b what is equityb which is something that seems to be confusing to many people.