At last, bricks and mortar get some repointing

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The Independent Online

Clapham was the Clerkenwell of the Eighties. One Saturday, I sat there in an estate agent's office surrounded by new-born yuppies eager to convert their bonuses into bricks and mortar. So hot was the market then that an agent acted like a "pit boss", chalking up new offerings as they became available, soon to be snapped up by potential purchasers. That was 1987. Not surprisingly, I was gazumped six times, before finally securing the seventh property.

Clapham was the Clerkenwell of the Eighties. One Saturday, I sat there in an estate agent's office surrounded by new-born yuppies eager to convert their bonuses into bricks and mortar. So hot was the market then that an agent acted like a "pit boss", chalking up new offerings as they became available, soon to be snapped up by potential purchasers. That was 1987. Not surprisingly, I was gazumped six times, before finally securing the seventh property.

Property booms are a major social phenomenon with serious economic consequences. We are obviously in the middle of one now, not just here in the UK, but throughout a big chunk of the industrialised world. It's particularly bad in areas associated with new technology, such as Silicon Valley. Not much evidence of the "tech wreck" there - the average price of a family home rose to $530,000 in October, some 5 per cent higher than in September.

But it is in the UK that we have a peculiarly visceral reaction to house price movements. When 75 per cent of us are owner-occupiers this is perhaps not surprising (only Belgium comes close among European countries). The Eighties boom that created this situation was an extra-ordinary piece of social engineering. The Thatcherite government encouraged its own version of a "stakeholder society" with tax incentives (and public pronouncements) which encouraged home ownership. Pre-Thatcher, just 50 per cent of people owned their own homes. She added 15 percentage points to that.

A lot of those tax incentives such as mortgage tax relief have been removed, and Gordon Brown has sought to further cool the current boom with the dampening effect of higher stamp duties. This has had some success. Prices in London may have risen 65 per cent in the last three years, but this is nothing compared with the peak annual rise of 75 per cent during the Eighties.

Nevertheless, this boom may yet have negative inflationary consequences, not helped by the operation of the market itself. Let's face it, Britain is a gazumper's paradise, and buying a house here is considered as pleasurable as going through a divorce or the death of a close family member.

Thank God that this Government is doing something about it. Last week saw the publication of the results of the pilot scheme in Bristol to introduce a seller's pack. This obliges the seller of a property to collect all of the relevant legal documents, and have an independent survey done, before bringing a property to market. In Bristol it was found that the average time from offer to exchange of contracts was cut to 48 days. This is still pretty poor compared with the likes of the Netherlands, where it is only four weeks, but it's an improvement on the national average of 62 days.

Indeed, it would seem sensible to ask if this measure is enough. It will speed up the process, yes. It probably cuts down the number of surveys. But it doesn't address the crucial question of gazumping - it just shortens the time in which it can happen.

Scotland is often cited as a gazump-free market. But the system there of sealed, binding bids leaves too much pricing power in the hands of the seller, and there have been accusations of malpractice. We need a major programme of reform that embraces every aspect of the market, and considers continental alternatives.

The tech boom which sparked this prosperity is providing some solutions itself. In the States, there has been a massive rise in the number of people who use the net for some part of their property search (AOL claims 70 per cent). House auctions are also gaining in popularity.

Politicians are often frightened to attempt reform in something so close to voters' hearts. The UK is a rich country with more capital than income, and a big part of that capital is in property.

But it is also the fact that most of us have floating rather than fixed mortgages which has serious economic repercussions. It has led in the past to an appalling situation where any attempt to slow the economy by raising interest rates was like pulling on a piece of string, with a brick attached. At first no movement, and then it hits you in the face. Slightly misjudge interest rates in this country, and you get recession.

Last week saw the tenth anniversary of Mrs Thatcher's fall, and an attempt by commentators to assess her legacy. The great rise in home ownership must be part of it, but so too must the policy corner this has backed us into. It's time for this generation to unwind that situation.

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