Property: So what happened to the crash, then?

Despite dire warnings, and a brief downward hiccup at the end of last year, property markets around the country are on the up again. Just what is going on out there?
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The Independent Online
The only gloom to be found in the current housing market is among frustrated buyers unable to find a home they like. Some markets have even done a U-turn since the beginning of the year, defying nearly all predictions.

Instead of prices falling in central London, they have risen, while elsewhere in the country lists of purchasers grow as the numbers selling dwindle away.

The question now is not how hard the economic landing is going to be but if it is going to happen at all. The worst may even have come and gone. Or, to further add to the quandary of forecasters, could low interest rates be creating a false sense of well being?

What is apparent, according to Yolande Barnes of Savills Research, is that the gap is opening up between what people want from housing and the stock that is available. The natural caution that homeowners have shown since the recession can be seen in their reluctance to buy just anything, either in order to get a foot on the property ladder or to keeping moving upwards.

"When estate agents talk about `a mismatch', what we are really seeing is a shortage of the right kind of stock," she explains. Research done by FPDSavills, based on Land Registry figures for Bristol, shows this situation vividly.

The Clifton side of the city, with its large houses in leafy streets, has recently seen some of the highest price rises in the country. On the less affluent side of town, where housing stock is mostly made up of industrial terraces, they have suffered some of the biggest falls, mainly because there is a diminishing number of people wanting to buy that kind of property.

These houses are increasingly likely to be snapped up by small investors, a worrying trend, says Barnes. "It points to a return of the speculative buyer. Too many inexperienced owner-occupiers are putting their savings into property without properly considering the future of rentals. They are borrowing heavily and piling into the same sort of properties, seduced by gross rental yields."

Cheap, turn-of-the-century terraces are particularly popular in cities such as Nottingham, Edinburgh and Oxford. In London there is an oversupply of new development in Clerkenwell, on the City fringes and in Docklands. "It is by no means clear that the boom-bust mentality is over. Simply because owner- occupiers are not borrowing so much, doesn't mean there is no danger," adds Yolande Barnes.

In contrast, the average mortgage on the main home is taking up 16 per cent of the average household income, compared with 43 per cent in 1989.

Buyers are still cautious and are likely to be far less influenced by interest rates than by fears of consolidation in the City and loss of jobs, says Paul Tayler of Sotheby's International Realty.

He has seen a large increase in enquiries in the past few weeks from home and abroad, but a lack of supply in the family-house sector. "There is no doubt people are moving less often and that they prefer to stay put if they cannot find exactly the right property."

The gap is widening between the best and the rest. Job uncertainty is not the preserve of the capital. Alan Gottschalk, the East Midlands regional director of Black Horse Agencies, is in no doubt that the increase in short-term contracts at work means that people feel less secure and are more reluctant to move.

Gottschalk says: "It is frightening that the number of properties coming on to the market compared with the same time last year has dropped by at least 10 per cent. We see no signs of this improving - or even of the usual Easter burst of activity. If this situation does continue it is bound to push up prices.

"What we don't want to see is raging house-price inflation, which is more likely to happen if the imbalance between buyers and sellers persists. Anyone serious about moving should put their home on the market, but it is understandable if they are reticent.

"The trouble is that buyers no longer expect to be able to find a house they like, not least because they have become extremely discerning, even about the smallest details. They are also taking longer to actually buy."

And simply upping sticks and decamping to the Cotswolds is no longer an easy move. Expectations far outreach the stock available and there is nothing to suggest the situation will ease. There are virtually no forced sellers, for instance.

In Oxford, Mark Smith of Knight Frank has a list of 70 people with pounds 1m to spend on a country property. "If I had a dozen farmhouses with land I could sell them tomorrow."

One such couple have been snarling at each other in a small rented cottage for more than two years, having missed out on five properties that went for about 50 per cent above the asking price. During that period prices have jumped by 30 per cent in this sector.

"Someone who has just paid pounds 100,000 over the odds justified it by saying that his children were nine and 10 when he first started looking for a family home, and are now 12 and 13," Smith says. "If he waited any longer, he said they would have left home.

"Plus we are seeing a lot of delayed completion dates - a year in at least one instance - which satisfies both buyer and seller."