UK House Prices -The next bubble waiting to burst ??

Thanks OEOM

here's a bit from the FT

Ripples from the property boom
By Jim Pickard, Property Correspondent

Published: December 23 2005 18:45 | Last updated: December 23 2005 18:45

The property boom that began in the most genteel streets of central London has taken a decade to reach the far extremities of the British Isles.



Angela Lawrie, 37, from Lochgelly in Fife, has for years read about the housing boom taking place in the rest of the country but – until recently – it had passed her town by.

She bought her home 10 years ago for £50,000. “For eight years it was stuck at £50,000, then suddenly in the last two years it has gone up to £110,000,” she says.

The kind of bidding battles that were once commonplace in southern England are now happening 400 miles away in Scotland.

In Cupar, Fife, not far from Lochgelly, estate agents at local firm Pagan Osborne were surprised in October when they put a three-bed cottage on the market for £149,000 and it went for £215,000.

Such prices may seem ludicrously cheap to readers in expensive towns such as Gerrards Cross in Buckinghamshire, (where average prices are £649,000), Weybridge in Surrey (£561,000) or Henley-on-Thames in Oxfordshire (£516,000). But in peripheral market towns, where salaries are well below the national average, homes are not necessarily a bargain.

“It is getting harder, I would say, if you are a first- time buyer here a flat costs £50,000, which is not as cheap as it was,” says Mrs Lawrie in Lochgelly.

Of the 20 towns with highest house price growth this year, nine were in Scotland, four in Northern Ireland and the rest in marginal towns in England and Wales.

They included Bootle in the north-west, a byword for urban decay, and Port Talbot, a grimy town in south Wales, which nestles around a steelworks. The other “winners” included Armagh in Northern Ireland and Holyhead, perched on the edge of north Wales.

First-equal on the list was Coatbridge in North Lanarkshire, up 35 per cent, which has two claims to fame. It boasts Scotland’s only electric tramway at Summerlee Heritage Park and is known as the “Buckfast capital of Britain” for its citizens’ fondness for the fortified wine made by monks in Devon.

Although prices in these towns have dramatically gained value in percentage terms, they have risen from very low bases. Of the 20 cheapest towns in the UK, 10 are in Scotland and the remainder are in Northern Ireland, Wales or northern England.

Lochgelly, despite a rise of 31 per cent this year, still has the cheapest housing in the country with an average price of £81,000.

For many economists, these price rises are the last spasm of a housing boom that began in London and has spread, year by year, like a ripple in a pond.

“I think it is real end-of-the-boom stuff, that’s how I’d see it,” says Richard Donnell, chief economist at Hometrack, the property website. According to Mr Donnell, the most expensive parts of London, such as Mayfair and Chelsea, began their price ascent as early as 1993, even as the rest of the country was mired in the recession.

The boom spread to elsewhere in central London, then the suburbs, then the rest of southern England. Then homeowners in the Midlands and the West Country noticed prices starting to rise.

The past few years have seen the ripples spread to Wales, northern England and – finally – to the most neglected parts of the country.

“The price growth has moved outwards and we are now seeing big rises, from a low base, in the most remote parts of the country,” says Mr Donnell.

House prices rose by 5 per cent across the UK this year, according to the Halifax, which many market observers have seen as proof of a “soft landing” after the galloping growth of recent years.

But the question remains: what will happen to UK average prices when the boom runs out of steam in Scotland, Northern Ireland and Wales?

Many towns in southern England have already seen falls in prices over the past year, says Martin Ellis, chief economist at the Halifax. The bank has not made a list of these.

Hometrack, by contrast, has done so. It claims that prices fell by 7 per cent in Milton Keynes this year, 6 per cent in Lincoln; 5 per cent in Leicester and 4 per cent in Plymouth.

Mr Ellis says the market will be quiet next year. “We are predicting a subdued year. Northern Ireland and Scotland will increasingly start running out of steam and their growth will fall to that of the rest of the country,” he says.

“Then it is likely that we will see a period where the market is broadly flat and that is why we are forecasting 3 per cent growth next year – which is nothing in real terms.”

Now is the time for homeowners and estate agents in the likes of Alexandria, Glenrothes, Irvine and Barrow-in-Furness to make the most of it, according to experts.

But price growth might already be slowing, says Irene Watson, an estate agent at Drummond Cook & Mackintosh in Cupar.

“We were very busy but it seems to have levelled off a bit now,” she says. “Early on in the year it was crazy.”

Most economists are tipping central London to be the best performer in the near future.

“Pound for pound, with what you get for your salary, London looks fairly good value,” adds Mr Donnell.