Britain's second-home capital hits choppy waters

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When Kensington and Chelsea council announced plans to crack down on second-home owners in the wealthy London borough, the residents of Salcombe, 200 miles away, heaved a sigh of exasperation.

For in this bucolic corner of south Devon, 40 per cent of properties are second homes - five times the rate in Kensington - a national record.

Flats and houses here sell for £600 a square foot - the same as in the royal borough, where the council wants to limit home purchases to those only with strong links to the authority.

In Salcombe, with one-bedroom apartments changing hands for £250,000 in a region where the average annual wage is below £20,000, young people and families are being forced out in unprecedented numbers.

The inflationary force behind the soaring property market of recent years is the wealthy, including Damon Albarn of the pop group Blur, the journalist Jennie Bond and David Dimbleby, who all have boltholes in the area.

But it does not stop there. Just across the estuary at East Portlemouth, 20 of the 30 buildings are holiday properties. The village has, in effect, died. The school and the village shop have closed, converted into homes.

According to the village's Liberal Democrat councillor, Julian Brazil, action is needed. "People don't hang around," he said. "They say, 'I can't afford to live here' and vote with their feet."

Those working for Salcombe lifeboat are all too aware of the problem. The present-day crew are inheritors of a proud tradition which dates back to 1869. But there could be choppy waters ahead. The lifeboat needs to have its crew within a three-minute dash of the station.

But living so near to the water means occupying some of the most expensive real estate in Britain. "We are concerned about the future," said Peter Hodges, the lifeboat operations manager. "We have a very good crew, but the resident population is only 1,600, which is very small, and the danger is that youngsters leaving home cannot afford to have a house in Salcombe." With a number of his crew perilously close to retirement age, he is eyeing the future with growing anxiety.

The average age of the local population is gradually rising as retired people flock in. In the nearby village of Lampton, 40 per cent of residents are pensioners.

Unlike in west London, the local authority has acted. Two years ago, second homeowners' council tax discount was slashed from 50 per cent to 10 per cent. Mr Brazil believes this did not go far enough. "Second home owners should pay five times the normal rate," he said. "People will think twice about spending £250,000 on a house if the ground rent is £10,000 a year."

Such radical action is not imminent. South Hams District Council has funnelled the additional cash into affordable and social housing. Some 300 reasonably priced homes have been built in the area in the past two years. But it is estimated that this number must be doubled for at least 10 years to meet the present waiting list.

But there are other ways. In the village of Dittisham, a former local authority cottage with views of the river Dart sold for £100,000 below the usual market price recently because only those that have worked or lived in Devon for the past three years were allowed to bid.

A local estate agent, Andrew Ireland, takes a different view. "The second-home market has been operating in Salcombe for 150 years, ever since Brunel opened up the West Country," he said.

"There are people who feel a mixture of envy and sheer frustration at their relatives', friends' and indeed their own inability to buy property. But the second-home market drives the economy here."