Property market reveals a divided Britain

It is a frenzy out there," says Tracy Kellett, a buying agent who searches London and the south-east for properties for her well-off clients. "I said prime London would go up 5% this year, but I think it is already up that much." Almost five years after the first stirrings of the credit crisis, Britain's housing market is deeply divided. The price crash that many analysts had predicted failed to materialise; but while Kellett struggles to find enough properties to sate the appetites of wealthy buyers in the capital, much of the rest of the country remains deep in the doldrums. "There is definitely a London story versus the rest of the country. It is London which has done better over the last year or so while many parts of the country have seen prices fall," says Martin Ellis of the Halifax. Kellett recently viewed a two-bed property at £1.25m. After 80 viewings in two days, it has attracted bids of more than £1.6m, and the agent has advised that the seller will only consider cash offers. In the price bracket where many of her clients are searching – £1m to £2m – she says the market is booming. Most of these properties are in Kensington and Chelsea, Mayfair or Knightsbridge – neighbourhoods in London that are central, boast some of the capital's swankiest shops and restaurants and, say agents, have developed some cachet abroad thanks to their association with Princess Diana. According to the Land Registry, prices in these areas are up by 9% year-on-year. The average is still below £1m, but there are many for sale for much, much more. Wealthy British buyers are vying with overseas investors who see sterling as a safe haven during the euro crisis. "London offers a unique mix of attributes that few other places in the world have," says Mohamed Nurmohamed, director of the Mayfair branch of estate agents Chesterton Humberts. "There's a reasonably responsible government, the fiscal plan does seem to be working, we have a very transparent legal system when it comes to property, we fare well on transaction costs – and, of course, you can set up a tax-free vehicle to hold the property." These are not the kind of investors you see elsewhere in the UK: they do not need income, just a safe place for their capital. They will typically stay in the property for a few weeks each year, and leave it empty the rest of the time. The hassle of dealing with tenants is not for them. As well as money coming in from new buyers, Nurmohamed says he is seeing existing clients snapping up properties for their extended family – in one block in Mayfair, the same family owns four multimillion-pound apartments. "We do have buyers on our books who are looking specifically to add to that prime holiday home." David Adams of estate agents John Taylor says he has seen clients "buying second, third, fourth, fifth and sixth properties – they buy one for them and then one for the kids." Recently he had a call on behalf of a buyer asking if he had any houses for sale for £30m. "I had one at £50m, so I said is there room for movement, and they said no – the other children had £30m spent on their properties, so it wouldn't be fair." Typically, there are several boxes these homes need to tick, says Nurmohamed: "A lot of the overseas investors buy the same kind of properties: they like lateral apartments [estate-agent-speak for flats on one floor], above ground floor, lock-up-and-leave … ideally with a porter and a lift." Depending on the buyer, security can also be important: agents talk of garages with bulletproof doors and properties with retina-scanning security at the front door. Often these types of fittings appeal to Russian buyers. The properties Adams is currently selling cost an average of £12m, but he has one on the market for £120m. At the bottom end of his book, at around £1.5m, your money could get you a two-bedroom pied-a-terre in a location such as Kensington or Chelsea with no garden. Higher up the market, things are much more luxurious, with bespoke bathrooms, kitchens and spa rooms. If you have £30m or so to spare, you may even get great views alongside your state-of-the-art security and valet parking. But money doesn't always secure your heart's desire. Nurmohamed says: "In Mayfair we've had people with £30m who can't get what they want." This is a market where the seller is king – or often minor royalty – and to even get in to the most expensive properties to take a look, you may need to show your credentials. "In some, very rare, cases people will prevent viewings unless they have evidence that the person can perform," says Nurmohamed. Sometimes, the swishest properties are off-market – that is, for sale, but not openly advertised. Adams says discretion is an important part of his work, as there are people who do not wish those around them to know they are selling. This may be because they don't want others to know about their finances, because they are famous and do not want their house splashed over the property pages, or because they are getting divorced. "Sometimes a couple is divorcing and they will put the property on the market but don't want the kids to know. If they get the right price, they will sell up and the money will be split in the settlement, but if they don't, she will keep it as part of the settlement." Two hundred and fifty miles away, the story is very different in Hartlepool, whose fortunes seem to sum up commentators' talk of a two-track British housing market. The north-eastern town is struggling with rising unemployment as a result of public sector cuts and the loss of manufacturing jobs. On York Road, one of the main streets running through the town, the blinds are down at the huge branch of Whitegates estate agents, which closed two years ago. Further up the road, the window of Robinsons estate agents makes grim reading for sellers: at least one in three properties advertised has been reduced and on one, buyers are told: "All serious offers considered." Across the road, Eden Estates is marketing homes at a guide price, and properties are being advertised for as little as £10,000 in the Great North Property Auction. Hartlepool saw house prices fall by 17% in 2011, and despite a 0.5% rise in January they remain at an average of just £78,623, compared with a peak of £113,352 in 2008. During the boom years, between 150 and 200 homes a month were selling, but since the end of 2008 that figure has only once hit 100, according to the Land Registry – and some properties have been on the market for all of that time. Ellis at the Halifax says the city is by no means alone. "Although Hartlepool may be at the extreme, there are other places that have also seen steep drops, in the north-east and across northern England." Ed Stansfield, property economist at consultancy Capital Economics, says that while the downturn in the London market was short-lived, the correction is by no means over in much of the rest of the country. "When you talk to people outside London, they say it's still going on," he says. The Hartlepool branch of Manners & Harrison is buzzing with phone calls and activity, but manager Sharon Richardson admits things have been difficult. She says: "I've been in the business 20 years and it's one of the hardest years I've done." One of the challenges has been educating sellers about what to expect. "They come in and say, 'I saw on television, house prices are on the up', and we say, 'they're not on the up in Hartlepool, our prices are still falling'." As with the UK as a whole there are pockets that seem to be driving down the average. One terraced house in the centre sold for just £20,000 last year, and there are many others on the market for less than £30,000. "First-time buyers are not interested in the town-centre terraces for the simple reason that investors buy them and they tenant them," says Kay Rhodes, branch manager for estate agent Reeds Rains. A price war between landlords has driven rents down, she says, leading to tenants who don't value the properties as much. "Those who remain as owner-occupiers will cut their losses and go – and they will probably sell to an investor." One of these streets is Rydal Street, a road of 54 small terraced houses where three are to let, two are for sale by an agent and one boarded-up property is for sale by auction. According to the website Property Bee, one has been on the market since 2008, while another, on since 2011, has had its price cut from £59,950 to £47,950. They are the kind of homes that, in other towns, might be lived in by students, but there is no university here to supply that kind of tenant. Meanwhile, builders are still constructing new homes – some of which you can see from the end of the street. Just across the road, the Blakelock Gardens development has three-bedroom homes with en-suites, gardens and off-street parking starting at £104,950. It's easy to see why would-be buyers might decide to sit tight until they can afford one of those – and when the government's new scheme to back 95% mortgages on new-build properties is introduced later this month, they are likely to look even more attractive. In Hartlepool, buyers hold the cards: Richardson says some sellers accept cheeky offers "because they are worried another buyer won't come along". Lee Brown has just accepted an offer after 11 months of trying to sell his house in Seaton Carew on the outskirts of town. He put the property on the market last Easter because his family wanted a home with a bigger garden. By September he'd had "minimal interest" and just three viewings, so he switched estate agent and reduced his asking price from £209,950 to £205,950. But it took another price cut, to £185,950, before he got an offer – and that was £10,000 below asking price. But the slow market has worked in his favour on the purchase: the sellers of the home his family fell in love with accepted a lower offer than originally agreed. And he is pragmatic about selling for £30,000 less than he hoped. "The final differential between the two is actually the same as it was a year ago. However, the agreed prices are significantly lower than both parties were probably happy with," he says. "As we are not doing this to make money, I feel happy with the prices involved, as we are buying a family home that we will spend the next stage of our lives in."