This year's housing boom is benign, say lenders

Britain should avoid repeating the disastrous boom and bust in the housing market of the late 1980s, mortgage lenders said yesterday.

Ten years ago prices soared after new buyers surged into the market, attracted by the previous government's policy of council house sales and easier access to mortgages. The result, according to the Council for Mortgage Lenders, was that prices first skyrocketed and then collapsed.

"One of the main insights of the new research is that the increase in transactions during the late 1980s was a one-off event," said the CML's director general, Michael Coogan.

Today instead of rushing to get a foot on the property ladder, young people are putting off the decision to purchase a house, the CML says. Many now graduate with significant student debts and cannot afford to take on a mortgage.

Average home sales have fallen to around 1.5m a year, well below the late 1980s peak of 2.1m. "Recent levels of transactions and the forecasts we are making for the future are close to the long-term trend," said Mr Coogan. "Although prices in some areas have grown strongly, the housing market is not unsustainable in the way it was a decade ago."

The rate of price increases - running at around 17% a year according to the latest figures from the Land Registry - has yet to reach the peaks of the late 1980s. "Similarly the pattern of a glut of transactions followed by a sharp reduction in their numbers is unlikely to be repeated today," the CML said.

But while mortgage lenders may believe current prices are sustainable, almost half of homeowners think their property is overvalued, according to new research.

The survey, conducted by NOP on behalf of online estate agent Asserta, discovered that 45% think their homes have become overvalued because of the property boom.

The situation is even more pronounced in the capital, with the survey finding 63% of Londoners who believe their property is overvalued.

Asserta's prime interest, however, appears to be in the real top of the range properties. The research follows publication of the latest quarterly Land Registry figures earlier this week showing the number of million-pound house sales continuing to rise.

An Asserta spokesman said: "City earnings and fat bonuses are fuelling the million pound plus property market." He said that million pound house sales had been on the increase since the late 1980s with sales having trebled since 1997.

The result is that in London million pound house hotspots have developed in Knightsbridge, Belgravia, Mayfair and Holland Park.

David Lundholm, marketing director of Asserta, said: "In the past a million pounds would buy a huge property, but in London and the south-east what you get for your money today is considerably less."

NOP surveyed 1,000 home-owners.