'Now people are buying houses to live in and enjoy. They want to make a home, not a quick profit' Repossessions underpin the recent auction boom
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In spring the British turn to thoughts of moving house. Well, they used to, but for some

time sales have stagnated. Will this year differ? Lesley Gillilan surveys the market

BACK in the summer of 1988, two friends announced that they were going to take the plunge - join the lower ranks of Britain's home-owning democracy. They had to buy a house, they said, before it was too late: before prices rose beyond their means. And they had six weeks before mortgage tax relief was reduced from £30,000 per person to £30,000 per household. They set out on a buying spree like two supermarket shoppers on a trolley dash.

They were gazumped twice before making an on-the-spot offer on a mean little Victorian terraced house. It needed heating, rewiring and remodelling. When I visited a few weeks later, the kitchen was a building site; a film of raw sewage floated on the concrete surface of the greenery-free zone they called a garden. No, they told me, they didn't like the area. They didn't like the house much. But it was a start. In two years they'd sell up. Move on. They might even make a profit. They lavished time and money on their investment.

In two years, their £62,000 house was worth little more than £46,000. This year they could be forced to sell for even less, for they are still there, up to their eyes in negative equity and vainly hoping for an upward surge in property values. Last month's cut in mortgage interest relief is one of a series of factors - hikes in interest rates, cuts in income support - which looks likely to prolong their agony.

As the number of new mortgage commitments plummets and estate agents report dwindling sales in the first quarter of 1995, the industry is forced to admit that hopes of a spring recovery have already faded. Maybe next year, they say, but in the short term the climate is far from sunny. Things could get even worse.

There are shafts of light here and there. Central London is busy. The estate agents Savills say the Kensing-ton market has "gone bananas". The demand for country properties and period townhouses in the millionaire category has increased by the power of 10, according to one agent. A two- tier market is clearly emerging because there is little sign of any buoyancy at the lower end.

The Housebuilders' Federation described the Government's anti-inflation strategy as a "cynical betrayal" of home-owners. And they were particularly miffed by the recent assertion of Stephen Dorrell, the Heritage Minister, that buyers should cease to look on their homes as investments. Political heresy, maybe, but close to the truth. Eve Lomas, president of the National Association of Estate Agents, believes that people no longer buy property as an investment. The Eighties are history.

"There's a dramatic difference in attitude," Lomas says. "People are buying houses to live in and enjoy. They want to make a home, not a quick profit. As a result they are making long-term commitments and have become more pernickety about what they buy and where. Any property that is well placed, well presented and realistically priced is selling."

It has been said that there has never been a better time to buy since the 1950s. Buyers can afford to be choosy. First-timers, for example, are now passing over one-bedroom flats in favour of two-bedroom houses. Pretty cottages and unconverted barns in handy rural locations can attract competitive bids.

A wiser, more discerning buyer is encouraging higher standards from those developers who are building new homes. And the "granny stackers" of the 1980s, as some of the build-'em-quick, pack-'em-in retirement developments became known, have disappeared. Nor are speculative builders cramming large period houses with poorly converted rabbit hutches any more. Developers have adopted a more sensitive approach to house-building.

"What is really constraining the market is lack of supply," says Peter Miller, national housing spokesman for the Royal Institute of Chartered Surveyors. "But once vendors accept that we are living in a low-inflation economy and will be for a long time to come, they will see that now is as good a time as any to sell. The market will start to regain momentum." But, then again, have you ever heard anyone involved in the housing market give way to long-term pessimism: the upturn is always around the corner.


For some time now estate agents have been scanning the horizon for signs of the prodigal first-time buyer. His (or her) return, so the theory goes, will fill a vacuum at the bottom end of the market and help to stimulate a recovery. Now the waiting is over. At least that's the hope - or the hype - of the National Association of Estate Agents, who recently issued a confident spring market analysis headed "first-time buyers lead property upturn".

A straw-poll of agents around the country, however, suggests that while London is busy, elsewhere the volume of first-time sales is underwhelming. Some areas, Leeds is one, report a boom in rentals at the expense of sales. True, unseasoned buyers are drifting back. What they are not doing is conforming to type.

The average age of an Eighties first-timer was 21.5 years. He or she tended to buy small flats and glorified bedsits with 100 per cent mortgages and expected to move on within a couple of years. The new generation of property-owning novices is considerably older (average age 29), they are paying bigger deposits (on average 17 per cent of the purchase price), and they are markedly more picky than their predecessors, particularly with regards to area. They are also taking a longer-term view of property purchases, and that means leap-frogging the traditional bottom rung of the housing ladder and going straight into two-bedroom flats or small terraced houses. Spatially-challenged one bedders are now the province of divorcees and are notoriously difficult to sell.

The Halifax Building Society puts the first-time buyer's average spend at £45,300. This is well below the £60,000 stamp-duty threshold, but enough, in most areas outside London, to buy a two-bedroom house with a bit of garden.

In a central area of Exeter, a two-bedroom Victorian terraced house can be bought for less than £50,000. In south Birmingham, a cottage-style property in Harbourne village sells at less than £60,000. In the south Manchester suburb of Didsbury, upwardly-mobile thirty-somethings are paying between £50,000 and £70,000 for houses and purpose-built two-bedroom flats. In the neighbouring Manchester suburb of Edgley, the local branch of Cornerstone claims that 99.9 per cent of prospective buyers are first-timers. The agency registered nearly 200 new applicants in February. Most are in their mid-30s and all are looking for Coronation Street-type houses at less than £40,000. According to a spokesman, Paul Hesketh, house prices have dropped by £10,000 in three years. Edgley flats are hard to shift. One has been on the market for four years.

In London, first-time purchasers are younger and better paid than the average and are spending anything up to £100,000. "In the boom, buyers who were single capitalised on joint mortgage relief by buying in pairs and they all wanted flats with two double bedrooms," says Olivia Fenneli, the director of the south London branch of Barnard Marcus. "Now you rarely see joint purchases, but single buyers still want to have at least one- and-a-half bedrooms."

One of the advantages of extra space is as an insurance against further interest rate increases. Under the Government's "room to let" exemption, home owners can rent out a spare room for up to £3,295 a year (around £63 a week) tax free.


The idealised English country cottage - set against the green meadows of a conservation area, hovering on the periphery of a village, not too far from a motorway junction and an urban superstore - is one of the most sought-after properties on the market. If the doorway is framed by a thicket of rambling vegetation (roses, preferably, but wisteria, clematis or honeysuckle will do) and opens out on to a half an acre of cottage garden, all the better.

A listed, stone-built property, stuffed to the distressed-oak beams with inglenooks, flagstones and ancient bread ovens, is about as near as you can get to the ultimate in saleability. And estate agents in the cottage- rich regions of the Home Counties, the Cotswolds and the West Country say they can't get enough of them. When I rang round all had a spring tale to tell in which a well-priced "character" cottage was snapped up before the ink was dry on the sale particulars. Some even sold at a fraction above guide prices.

Last month, Palmer Snell in South Petherton, Somerset, sold a modernised, detached village property, with four bedrooms, half an acre and "outstanding rural views", at £89,950 within three days of receiving the instruction. The agent Lesley Probyn says her office has been "inundated" with spring enquiries for cottages in the £80,000 to £100,000 price range.

In the same period, Strutt & Parker in Chester took a three-bedroom Shropshire cottage to auction with a guide price of £55,000 and sold it for £71,000. A semi-detached village property in Sussex attracted stiff competition and was sold within a week by Guy Leonard & Co at £10,000 above the £135,000 guide price. And when Savills in Bath marketed a pair of Victorian-Gothic estate cottages at Orchardleigh Park, near Frome, they were swamped by prospective buyers, some of them making offers over the phone. These two Grade II listed lodges, both keenly priced at under £85,000 and in need of restoration, attracted hundreds of applicants and sold within a week of the first advertisement. Most of the interest came from London and was representative of two dominant species of cottage seeker. Both categories are wanting to escape from the city for a better quality of life in the sticks, but while one hopes to get out for good, the other is happy to run away just at weekends.

"I'm amazed by the number of people looking for second homes and staggered by the sums they are prepared to pay," says the agent, Keith Maslin of Hamptons in Malmsbury, Wiltshire. "It is not unusual for people to part with £300,000 or more." These buyers usually want immaculate refurbished properties.

In general, however, raw, unadulterated rustication with an air of atmospheric neglect and plenty of scope for improvement has an edge over completed renovations. And in the low to middle price brands, Jonathan Bramwell of Savills' Bath office has noticed a recent upturn in the volume of enquiries from youngish get-away-from-it-all professionals looking for low-tech country properties with room enough for a high-tech home-based office.

Bargains are rare, but dreamy cottages in accessible beauty spots are still a very good buy. According to Colin Swait at Hamptons' Godalming office in Surrey, they have held their value. "Whereas overall property prices have dropped by 25 to 30 per cent since 1988, cottages have depreciated by no more than 15 per cent. They have proved to be the best investments of all."


The demand for architectural oddities in various stages of dereliction has, according to Gwyn Headley of the specialist estate agent Pavilions of Splendour, remained undented by the recession. The market is crowded with people looking for unorthodox and wildly romantic properties - in many cases, in ruins. Windmills, folly towers and estate lodges top a list of sought-after refurbishment projects.

The main attraction, Headley says, is cost. People want buildings that involve a low capital outlay but demand the further investment of "sweat equity", he says. Owners can turn a wreck into an asset and they can realise their dreams at their own pace as funds become available.

Since 1 March there is the added financial incentive of a VAT exemption. Builders can reclaim the tax on the cost of all materials and services relating to conversion schemes of the barn-into-home type - non-residential buildings into private houses. The exemption also applies to the cost of improving derelict dwellings providing owners can prove the building has remained uninhabited since 1973.

The sale of an out-of-the-ordinary property usually generates more interest than offers but the vogue for conversion is becoming more mainstream. An annual Conversion Award scheme has now become a fixture of the Daily Mail's Ideal Home Exhibition - an institution not usually associated with the wildly unconventional. This year's winning scheme is a converted church in South Wales.

Redundant church buildings are plentiful (over 1,000 Welsh chapels face closure in the next decade) and can be bought fairly cheaply. A village Methodist church in Lancashire is currently offered (through Richard Turner & Son) at £50,000. A Sunday school hall in Okehampton, Devon, is for sale through Gordon Vick at £27,500. Both sales include detailed planning permission for a dwelling.

Apart from the low cost, converters are sold on the idea that undomesticated buildings offer a clean canvas - untainted by developer's finishes, plastic windows and other people's eau-de-nil bathroom suites. But opportunities for unbridled self-expression are subject to ever more planning regulations and listed building constraints.

If many are looking for an undeveloped original, fewer it seems want to buy the finished article. The 1980s conversion of St Oswald's Hall, a listed medieval church building on the outskirts of York, won a design award but that has not encouraged a swift sale. Valued at £185,000 it has lingered on the market for more than a year. "Beautifully done but too idiosyncratic for the average buyer," says the agent at Jackson Stops & Staff. Selling this type of property, he says, is a matter of waiting patiently for the rare purchaser who shares the vendor's taste and ideas.

Julian Prout spent six years and £50,000 turning four stone walls of a ruined mill that had cost £20,000 into a four-bedroom house. After two years on the market at £195,000, Penford Mill is still unsold. The price has been reduced to £175,000.

Buyers with a DIY bent are advised to resist paying too much for raw materials. If they are converting for resale their investment including building costs has to add up to realistic resale price. And local authorities are not always amenable to change of use on commercial buildings. The schemes that stand the most chance of success are those that celebrate a building's intrinsic architectural qualities. Uncompromised spaces and notionally demountable fittings will find favour with planning officials and future buyers.


The house-building industry is not exactly firing on all cylinders but over the last year it has at least managed to corner a larger share of the overall market. Prices remain stable, at a nationwide average of £67,866, and as the trickle of early spring buyers begins to look more like a small crowd, housebuilders predict an even bigger increase in turnover this year.

The Housebuilders Federation puts it down to "an irresistible continuation of choice and value for money". What that means in essence is that developers have a lot of unsold plots to shift and in order to maintain half-decent sales figures they are bargaining, doing deals and trading in - effectively undercutting the second-hand housing market in the process.

Among a range of temptations, builders are throwing in the cost of everything from stamp duty, mortgage redundancy insurance, surveys and legal fees, to removals, carpets and appliances. Some are offering discount mortgages and "gifted deposits" (ie, a discount) to first-time buyers. Others are turning trapped vendors into buyers by taking hard-to-sell properties off their hands in exchange for brand new ones.

As well as the value for money they may offer, new homes are perceived as being a secure, low-maintenance, energy-efficient product protected by a warranty. A competitive market has helped to improve general standards of construction. And as long as you are not expecting 21st-century innovation, houses are also looking a lot better lately.

Connie Vitto of the housebuilders Ideal Homes describes the latest in housing style as a design revolution. "Nobody is building boxes any more," she says. 'The industry is much more sensitive to kerb appeal."

Translated into brick and block, that means cosy groups of mock Victorian- Edwardian houses that are arranged around duckponds and olde England village greens. Housing fashions come and go like any others, and the in things at the moment are barge-boards, cottagey porches, sweeping gables, bay windows, pantiles, and fiddly bits of flint and decorative brickwork.

The contemporary garden suburb tends to come in a small, neatly landscaped package like Ideal Homes' Wynyard Village in Cleveland (prices from £85,000) where 160 homes are planned within a five-year timescale. But the confident Eighties-style mega-development is still around. At Great Notley Garden Village in Braintree, Essex (prices from £112,500), Countryside Properties plan to build 2,000 houses - albeit in prettily clustered hamlets.

At Abbey Meads, in Swindon, the first of a series of three urban villages is putting down roots in the town's Northern Development Area. And here there are plans to build 10,000 homes within the next 15 years, making the £650 million project the largest private housing scheme in Europe. Bristol's Bradley Stoke, which originally planned for 8,500 houses, made the same grandiose claim back in 1986. It was cut short by the recession, and what there is of the development is now known locally as Sadly Broke.

"A lot of lessons were learnt from Bradley Stoke," says Mike Elliott of Prowtings, one of the dominant players in a consortium of builders. Abbey Meads and its sister villages will develop "in line with demand".


The residential property auction is one corner of the market that has grown fatter and fitter during the recession. In the last few years, a steady supply of repossessions by banks and building societies has doubled the volume of lots that are brought to auction. Last year alone, properties worth around £800 million were offered by the nation's auctioneers. The figures encompass the whole gambit of auction fodder, including commercial properties and unusual items that are hard to value, but repossessed homes continue to underpin the recent boom in saleroom activity.

Auction houses have made a determined effort to lure the ordinary purchaser - also known as the "end-user" - into the saleroom. How-to-buy guides, auctions-in-action videos, reassuring seminars and mortgage advice are among a variety of services that are designed to demystify the process.

The auction is being sold as a decisive, no-nonsense, gazumping-free method of buying properties with guaranteed vacant possession, and as a result an unprecedented number of first-time buyers have tried their hand at the auction game. As one auctioneer put it: "You see a lot more prams in the saleroom these days."

Buyers have to produce evidence that they are able to raise the money and are advised to survey the property in advance. There is, therefore, the risk of losing the cost of the survey to a higher bidder or of getting carried away by the heat of the moment. While most buyers enter the fray in the hope of coming away with a cheap property, genuine bargains are rare.

At Barnard Marcus's London sale in March, four private buyers bid against each other for a one-bedroom flat in Clapham, south London. Sold at £45,000, the property achieved £9,0000 above the guide price. And at a recent auction held by the agents Allsop & Co, one young couple bid £271,000 (£20,000 more than the guide price) for a repossessed three-bedroom, two-bathroom flat in a mansion block in Cheyne Walk in Chelsea.

Buyers should be aware, says Chris Glen at Barnard Marcus, that the majority of repossessed properties have failed to find a buyer elsewhere, and often present a multitude of structural or legal problems.

As the supply of repossessions falls away (dropping by around 30 per cent last year), auction houses are hoping to regain a foothold in pre- recession staples such as commercial and investment properties.But could they not generate new business by persuading more private vendors to sell at auction? After all, as a rapid, clear-cut method of selling, it should be as attractive to vendors as it is to buyers - particularly in a depressed market. "Many auctioneers would like to crack that nut," says Gary Murphy of Allsop and Co. "But in the private treaty market, timing is critical. Selling at auction would not suit the majority of vendors."

Part of the resistance is a fear that the hammer will fall prematurely at a derisory figure. In fact, a good quality property has an edge over those with the gloomy "By Order of Mortgagees in Possession" label and tend to do well in the saleroom.

One private vendor who had failed to sell a two-up, two-down terraced house in south London at £36,000 put it up for auction through Winkworth's in February. With a reserve price of £35,000, the property sold on the day for £42,000. At the same sale, another private vendor sold a £19,000 flat for £25,000. In each case, the auctioneer took 2.5 per cent in commission and the vendor risked little more than a £250 entry fee for inclusion in the catalogue.


Living in a custom-built pensioners' ghetto is not everyone's retirement dream but even in today's sluggish market, the demand for serviced retirement homes outstrips supply. One reason for the shortage is a lack of suitable land, which in an ideal world would offer easy, level access to local urban amenities. Another is that few builders are now willing to take the risk. But it was not ever thus. Ten years ago, when the sheltered housing concept took off, developers thought they couldn't lose.

The market was ripe: an ever-increasing population of over-sixties who had paid off mortgages and had a tidy capital sum from the sale of their homes. They could buy with cash and, with rates high, live off the interest of their remaining capital. New schemes sprouted up all over the place. Many builders, however, misjudged buyers' needs, says How-ard Packman of Sheltered Housing Services (SHS), an independent consultancy for buyers. "They got greedier and started building smaller and meaner." They also set prices and service charges at inflated levels. And, of course, the fall in house prices (and interest rates) meant there were fewer potential buyers.

Dozens of schemes went into liquidation, and at least 100 housebuilders who had been competing for the grey pound beat a hasty retreat. Only a handful of specialist developers now remain active. John McCarthy of the market leader McCarthy & Stone, who has acquired 40 new sites in the last 18 months, says builders are now more sensitive to buyers' expectations, particularly with regards to generous space and realistic pricing.

The minimum requirement for sheltered housing is an alarm system, but most new developments have roomy self-contained accommodation complete with non-slip floors and waist-high power points. Over-heads are covered by modest service charges due to be governed by a statutory code of practice. And residents (75 per cent female, average age 74 years) benefit from in-house communal lounges, guest suites, laundries, hobby centres, 24- hour care services and staff who weed flower beds and change light bulbs.

Most of the developments are unremarkable blocks of flats sold at a moderate price. Around half the flats in any new community sell immediately, but sales are particularly healthy at the top end of the market.

The award-wining retirement village at Elmbridge in Cranleigh, Surrey, is a rare Eighties' success story, having run at close to 100 per cent occupancy since it opened 11 years ago. Now the same developers are creating Cedars Village in Chorleywood, Hertfordshire, which is half country club, half sheltered housing estate, set in the grounds of a Grade II listed mansion. Prices range from £89,950 for an apartment to £135,000 for a detached bungalow. Like Elmbridge, the development has a guaranteed buy- back scheme.

Pegasus Retirement Homes has solved the land shortage issue by adapting existing properties and is in the process of converting an Edwardian hotel in central Bath into 45 luxury flats. The scheme won't be completed until December 1996, but sales, says the director, Mike McCarthy, "have taken off like an express train". Nearly half the flats (priced from £150,000- £300,000) have already been reserved. !