Personal Finance: In some cases properties less than 10 years old are being bulldozed

BRITAIN IS rapidly dividing into two nations again, or rather three if the socially excluded who live in inner cities and pockets of high unemployment are recognised as an enduring category and not ignored. For the rest of us the split is between London and South-east England and the rest of the country, including the Midlands. the North, Wales and most of Scotland.

In the superheated South-east property prices are high and apparently rising at a speed that means many owners are making more money on their homes than they are by going out to work. It is great for owners who are already well established on the housing ladder but not much fun for first- time buyers, especially if they have not inherited a substantial lump sum.

In the rest of the country, including most rural areas beyond the range of commuting, property prices are low and only edging higher, which means homes are affordable even to first-time buyers.

But even well established owners have only a relatively small amount of positive equity. The gap between the dearest and cheapest properties sometimes narrows slightly, so there can be brief windows of opportunity to get on to the ladder in the South-east, but over the last three decades the gap between the top and bottom of the housing market has widened inexorably.

The same kind of house can easily be worth two or three times as much in the most desirable parts of the South-east as it would in the Midlands and the North. The difference is much greater than the difference in average earnings, so the choice of where to live and work is becoming increasingly important. Once the decision is taken it will become increasingly hard to move to a more expensive area without a substantial increase in earnings.

Just as the top end of the market is becoming overheated with hot spots and million pound homes appearing like mushrooms, the bottom is actually falling out of the market in the most depressed parts of the country.

A new report this week from the Rowntree Commission says that many houses are now virtually unsaleable in the more deprived parts of the country, especially in the inner suburbs of industrial Northern cities such as Sheffield and Liverpool and in former coalfield areas such as south Wales, where new jobs are hard to find and families are looking to leave. However, homes are also changing hands for less than pounds 20,000 in isolated rural areas as far south as Huntingdon and the Fens and again in some seaside towns, where the bed and breakfast trade has dwindled to vanishing point as holiday-makers take advantage of cheap foreign holidays.

In many cases the slump in property values has been compounded by high levels of unemployment, poor amenities and rising crime, which means that even tenants are moving out, properties are being boarded up and vandalised and no-one wants to buy, even if they could find a willing lender. Some owners find themselves in negative equity, a widespread problem of the early Nineties which the latest surge in confidence was supposed to have eradicated altogether. Others find that, after they have spent a lifetime paying off a mortgage, they do not have the nest egg to leave their families that most home-buyers have taken for granted as a reward for their years of prudence.

A whole generation of Britons who have marvelled at how cheap property is in parts of France, Italy and Spain, where the population has been in decline since the end of the Second World War, are now finding the same phenomenon appearing in overcrowded Britain, and the chances are that the gap between top and bottom will widen as the sons and daughters of families trapped in areas of high unemployment move away and their parents pass on, leaving behind properties that are simply unwanted.

Housing associations are already finding that property that has been expensively regenerated is no longer wanted and that, in some cases, properties less than 10 years old are being bulldozed because they can find no one who wants to live in them.

One lesson is that urban regeneration will not work unless there are enough jobs to support a living, working community; another is that unplanned market forces will lead to increasing concentration on the most desirable areas. Inevitably this will lead to pressure from developers for the relaxation of restrictions on building in greenbelt areas and the corridors where public and private transport are available, taking workers to the places where labour is in demand.

At the very least it may be necessary either to relax the building controls on greenfield sites or to start a new round of regional planning, including a new generation of new towns, although it is hard to see New Labour sanctioning the kind of public finance that would be needed to pay the cost of providing the necessary infrastructure. More thought may also have to be given to building protected communities in vulnerable parts of the inner cities, guarded by walls and security gates to restrict access to non-residents.

`The Independent' has published a free 20-page `Guide to Independent Financial Advice', which tells you about the areas in which an independent financial adviser can help and how you can go about finding one. It comes with a list of names and telephone numbers to whom you can go for help. Call 0117-971-2932 for a copy.

In the box attached to Teresa Hunter's article on independent financial advice in last week's `Your Money' we inadvertently gave the wrong number for IFA Promotions, which will give you the names and addresses of three independent financial advisers in your area. The correct number to call is 0117-971-1177.