Property: So who wants a price rise anyway?

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The Independent Online
WHAT a difference a couple of days make. Home sales fell by more than 5 per cent in April, according to the Corporate Estate Agents Property Index. As this is one of the most comprehensive measures of market confidence, drawing on offices which handle around half the country's deals, does that mean the recovery has gone sour?

Apparently not. Two bank holidays were enough to drag down the figures, says Peter Constable, who runs the monthly survey. People have this strange idea that Easter is a boom time for buyers, he adds. 'In fact, it is one of the quietest times of the year.'

Watch the figures climb again when May is out, he forecasts. Then we should see the exchanges coming through from deals started during the really busy period in every year - the first few weeks of January.

MY correspondence with the late Sigmund Freud last week about confusing information on prices touched a nerve among some readers. Oliver Owen of Hove, Sussex, writes to suggest a more fruitful seance might be held with an economist who could explain why 'fair' rents have risen by 100 per cent recently, driving 'natural tenants' such as he to buy against their will. And why are forecasts of rising prices given such huge coverage when they are bound to stoke up inflationary pressure again?

A more fundamental question is why price rises are considered desirable at all. Richard Davis, of the London Research Centre, says: 'With up to 100,000 additional affordable homes needed in the capital every year, would not price stability be preferable?'

He has not forgotten the thousands of owners who desperately need higher values to break their way out of the negative equity trap. But there is another solution, he says, in the latest LRC Quarterly Bulletin. A family with a pounds 60,000 mortgage on a pounds 50,000 home will have to wait as long as four years for price rises to rescue them. But providing they have a good payment record and adequate income, a lender could allow a new mortgage of pounds 110,000 so they could move to a pounds 100,000 house.

Payments would soar from pounds 380 to pounds 660 a month, but he says this is still only slightly higher than bills on the original loan when interest rates were at 14.5 per cent for most of 1989 and 1990 - and less than when they peaked at 15.4 per cent.

Prices would need to increase by only 10 per cent for the new home to cover the loan fully, which is possible within two years. Most borrowers would not need such a big mortgage increase, and the overall result would be a livelier market, quicker recovery from negative equity and people living in more suitable homes, says Mr Davis.

From the Concise Oxford Dictionary: pariah n. 1. Member of low caste; social outcast. 2. Home seller desperate for money (the Royal Institution of Chartered Surveyors' monthly survey)

(An estate agent's office. Big Jim, area co-ordinator for Weesellum Quick, is lecturing the local manager, Nigel Ffolkes-Farquharson.)

BJ: 'OK, Nigel. Let's stop sucking up to these people just because they pay our wages. Tell them straight. If they put up prices, buyers will walk away. Their property will become market pariahs.'

N: 'But boss. They keep flashing headlines saying prices are recovering. And they are desperate to get a little way back to the value we put on them a couple of years ago.'

BJ: 'Yes, it's all the fault of the

media. If they stopped pumping out such stories, we could get

shot of all these places and collect our fees.'

N: 'So what are we saying about prices, boss?'

BJ: 'Following the party line, old chap. Market emerging from worst slump in memory . . . set a reasonable asking price and you should sell within a reasonable period . . . 80 per cent of chartered surveyors and estate agents report prices holding steady.'

N: 'But everyone knows we are owned by the Bigbux Finance Group. It just issued a report saying values will jump this year.'

BJ: 'No problem. Tell them those finance brainboxes don't have a clue. They're all stuck in ivory towers.'

N: 'Right, boss. And we give exactly the same message to buyers, I suppose?'

BJ: 'WHAT]] Of course not. Tell them they had better get in quick, as prices are rising.'

N: 'Gee, boss. I can see now why you are a boss.'