The property boom: Can it last?

A two-bed flat in Brunswick Terrace picked up for less than £65,000 in 1993 is now worth roughly £350,000.

That's an average price increase of almost £30,000 every year - far more than Brighton and Hove's average wage.

The huge rises, revealed by trawling through back issues of The Argus' property pages and comparing them with this week's latest valuations, bring the Nineties property boom into stark relief.

No wonder there is unrest across public services. If teachers' wages had mirrored the 500 per cent surge in property prices in Hove's most elegant square, the average primary teacher would be taking home close to £100,000 a year, rather than just over £23,000.

All very well for those on the property ladder but first-time buyers are facing an impossible mission to afford even a bedsit.

Young professionals whose parents bought homes in the city 20 years ago are now forced to spend their wages on rent rather than property.

One homeowner said: "It's very worrying. Where are my kids going to live when they leave home? I bought my house ten years ago but there's no way they could find the sort of money you would now need."

Simon Cowley, 30, of Massey Property Services in Dyke Road, said: "When I started in this job ten years ago I remember houses in Edburton Road in Fiveways going for £80,000 which we are now putting on the market for £300,000 or more.

"Houses in Hollingdean which went for £45,000 are now up for £200,000 - even more if there is a garage."

He added that in the last three or four years he had seen the influx of people from London coming to buy in Brighton which played a part in pushing up property prices.

He said: "Before that, they were looking for second homes or investment. Then there was the rumour of the high-speed rail link and people wanted to buy before that pushed prices up.

"That never happened of course and there are people selling up and moving back to London now because they can't deal with the trains.

"There are still a lot of people starting families and realising they don't want to bring their kids up in London."

Glenn Mishon, partner at Brighton-based Mishon Mackay, said: "1993 was the absolute rock bottom of the recession but things had started to pick up by early 1994.

"In a normal climate you could expect to see a rise of about seven or eight per cent per year but I've seen prices go up by three or four-fold in the past ten years.

"Brighton and Hove has always been cocooned in its own market. We got hit the hardest in the late Eighties, losing 50 per cent of our market value but we had recouped that by about 1996."

Over the last few years, demand has outstripped supply but that has changed in the past ten months so supply now exceeds demand.

Mishon Mackay hit the headlines recently when it sold the first house to reach £3 million in Brighton and Hove.

The company has a house on the market in Hove going for £2.85 million. It has eight bedrooms, seven bathrooms, a huge garden, tennis courts and a swimming pool. In 1993, a similar home sold for £425,000.

Mr Mishon said: "Our upper end is usually between one to two million, for which you might get a period house very near the seafront, or a six bedroom house on Tongdean Avenue."

The other end of the Mishon Mackay scale would be a studio flat for about £80-100,000, whereas in 1993 the same thing would have cost about £20,000.

Wayne Gibbs, of independent mortgage advisers Charcol's Brighton office, said while the market slowing was inevitable, its upward trend would continue.

He said: "We are concerned about the ability of first-time buyers to get on the ladder in the Brighton area. But we speak to lenders all the time and there are some practices out there to help them.

"In the medium term, ten per cent rises will continue as demand is still massively high for quality properties.

"About 20 per cent of our business is in buy-to-let. Property is still seen as a good long-term investment.

"In 2002, across the UK, prices went up 21 per cent and they have gone up 18 per cent in 2003.

"We predict there will be an eight to 12 per cent rise in the UK next year. There's no indication there will be a property price crash. Unemployment is still fairly stable, the only possible problem could be the increasing national debt."

One way to ensure a new generation of homeowners is to create extra low-cost housing.

Brighton and Hove City Council insists at least 40 per cent of new homes must be "affordable" in developments of 11 or more properties.

The authority is unusual in demanding such a high proportion. However, if prices continue to rise, even these properties could cease to be affordable in the future.

So does anyone gain by property inflation?

Michael Barrow, a lecturer in economics at the University of Sussex, said: "If someone owns a house they will gain by house price inflation. It can go up in value but the debt does not because the mortgage is fixed.

"But if everybody's has gone up in value, we can't all be better off. Those who are worse off are the people who don't own houses and want to.

"Homeowners' wealth is going up but the only time they can take advantage of it is if they move somewhere cheaper.

"It's a way of saving money for retirement by moving to a smaller house. To that extent, homes are better investments than bonds or shares."

* House prices in Brighton and Hove are higher than some areas of London, yet workers rarely gain a wage allowance which those in the capital are entitled to.

Brighton and Hove City Council's Unison employees are the latest group to demand a South-East weighting.

Union leaders claim staff are being priced out of the area and the latest available figures from the Land Registry seem to reflect this.

In the period April to June this year, the average dwelling in the resort cost £188,046. This was higher than six of London's 33 boroughs.

Nationwide, the city remains one of the most sought-after and therefore expensive areas to live.

Of 108 remaining counties and unitary authority areas in England and Wales, just 13 were dearer than the City by the Sea.

These included: Bath and North East Somerset, Dorset, Buckinghamshire, areas of Berkshire, Hampshire, Hertfordshire, Oxfordshire and Surrey.

Flats in Brighton and Hove were exchanging hands at an average £147,292 in the period, which was beaten by just seven authorities outside London. These were Bath, Bristol, Poole, Reading, Surrey, Windsor and Wokingham. They were also more expensive than nine London boroughs.

The Land Registry's next set of figures is due out on November 10 and these could reveal the average property price in Brighton and Hove has broken through the £200,000 barrier.

Last month, a survey by the Nationwide building society claimed it was already £219,000.

Wednesday October 29, 2003