16/08/07

Property's winners and losers

YESTERDAY'S revelation that Island house prices are continuing to rise at a startling rate will have led to elation in some circles and despair in others. The finding that the average cost of a three-bedroom house has risen to £417,000 will have made many Islanders feel considerably richer. However, for those still waiting and hoping to put a foot on the housing ladder, it is a depressing figure.

But, as some estate agents have already suggested, the £400,000-plus figure must be taken with a pinch of salt. Although it is an average price, it is highly unlikely to be the price that people will be able to secure for their average three-bedroom property. The index is likely to be skewed by the many high-price luxury three-bedroom homes to be found in the Island.

Those who suddenly sense loose cash jingling in their pockets should also remember this - anyone who sells and wants to remain in the Island will probably want to buy again, a process which, when the additional costs of transactions are taken into account, will leave them with less money rather than more. The exceptions to this rule are, of course, those cases where home owners downsize or leave the Island and buy cheaper property elsewhere.

But although the position of the apparent winners in the present housing price spiral is ambiguous, little of much major encouragement can be said for the situation of those hoping to buy for the first time. The house price survey's average price in the three-bedroom category is in the region of 15 times average earnings - a daunting target for the vast majority of young people.

Meanwhile, inconvenient facts of economic life are that the price of homes depends to a large extent on supply and that any significant increase in supply has environmental consequences in a small community with finite boundaries.

If there is a crumb of comfort, it is to be found in the market for flats, where prices in the two-bedroom category have fallen by six per cent in the past year. Such properties may often be a far cry from the houses with gardens to which first-time buyers could once aspire, but they do represent an entry point to home ownership.