Down your street: the £1m des res

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The Independent Online

It's no longer the provenance of pop stars, film actors or even a dot com tycoon. The £1m pound house is becoming a commonplace in the South-east in a property boom that has not been seen since the mid-1980s.

It's no longer the provenance of pop stars, film actors or even a dot com tycoon. The £1m pound house is becoming a commonplace in the South-east in a property boom that has not been seen since the mid-1980s.

London estate agents are selling houses worth more than a £1m in just days, with competing buyers bidding even higher. In some areas such as Chelsea £1m will no longer buy you even a decent-sized family home. Yesterday one agent sold a former artisan's cottage with no garden for £1.1m.

Demand for expensive homes is now so high that last week one estate agent reported that it had 3,276 people on its books looking for £1m-plus homes in the capital. Some 200 people registered in January alone. But what is remarkable about this boom is that the £1m pound barrier is not limited to the centre of London, nor to cash buyers from overseas. In Cheshire, £40,000-a-week Manchester United footballers, and soap stars, have pushed house prices in Alderley Edge over that barrier. Today families wanting to buy a four-bedroomed house in the suburbs are paying the same. "If you have a family and you want a house with a garden for £1m, forget the centre of London," said David Forbes, an estate agent. "You need to start heading for the suburbs and the Home Counties."

While the best property is paid for by people enjoying City bonuses, inherited wealth, share dividends and sale of their existing homes, there is growing concern that the price boom is being fed by unscrupulous lenders. There is now evidence that in London, borrowers are securing mortgages that are as high as five times their income.

Despite a report from the Halifax yesterday, saying that prices have shown signs of peaking, estate agents claim that people are so keen to buy that in the most desirable neighbourhoods even the three-bedroomed home with garden, that epitomises suburbia, now costs £500,000. Last year house prices increased an average 16 per cent across the country, with London and the South-east experiencing increases of 25 per cent. Sales this year have shown increases of 10 per cent, with hot spots such as South-west London showing as much as a 20 per cent increase in the past 12 weeks. "There is an almost insatiable demand from successful couples wanting family homes," said chartered surveyor Robert Dowler.

Until recently the £1m home market was dominated by overseas buyers. But today it is being overtaken by young successful British couples, with well-paid careers. Those who buy the best houses in areas such as Chelsea and Notting Hill tend to be people who work in the City and the booming internet industry.

According to Nick Staton, whose estate agency covers north London, £1m no longer brings the guarantee of a pool and tennis court. Demand has also pushed up prices in the West Midlands commuter belt.

Lenders have been urged to be more prudent by their regulator. A survey by the Financial Services Authority, which oversees the mortgage market, showed that banks and building societies were encouraging people to stretch their budgets to the limit by borrowing up to nearly four times their salary.

But another survey by the housing specialists London Residential Research reveals that in the capital borrowers are securing deals worth up to five times their income. Geoff Marsh, the director, said: "The common view is that people are buying such expensive property because of high incomes and low interest rates. But the key to the boom is how much they are being allowed to borrow. This is happening across London, in every area from the most expensive to ordinary suburbs. This bubble might not burst, but it will deflate. It cannot continue at these levels."

The boom is different from the one in 1988, which was fuelled by first-time buyers. This time it has been boosted by fierce competition between lenders. With the growth of internet and supermarket banking, the mortgage market has expanded rapidly in the past two years, and the new entrants to the market are keen to secure as much business as possible. With buyers made confident by a stable economy, low interest rates, and promises of five-year fixed interest deals, they are being persuaded to borrow amounts of money which would once have been considered unthinkable.

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