Restoring faith in property

Telegraph - Estate agents on average are selling only two or three houses a month. Mortgages are harder to come by than springs in a desert. And yet, if a town house in a good address with peeling paint and dodgy plumbing, or a picturesque cottage desperately in need of renovation appears on the market, crowds of potential buyers suddenly emerge to compete for the pleasure of a life-changing project.

Nothing, it seems, has dampened property lovers' desire to rescue. Cluttons in London reports that unmodernised properties are attracting the "creative buyers" who anticipate huge price growth when the market starts to move again. "Both developers and individuals are searching out the real bargains," says James Hyman, partner for residential sales. "Unmodernised properties in need of complete renovation are coming back into vogue at knock-down prices and offer greater long-term added value than more expensive properties." This is the new wreckonomics.

Classic custom campersWhen estate agent Matthew Harvey of Chesterton Humberts put a Grade II listed two-bedroom thatched cottage at Rushall in Wiltshire on the market on March 7 with a guide price of £150,000, he was blown away by enquiries. No 2 Elm Tree Cottages has a solid-fuelled stove with a back boiler, a downstairs bathroom, and sales particulars bearing the magic words "requires modernisation". Matthew had eight viewings on the first day, and every other call thereafter was about the cottage.

"A lot of young couples who have always dreamed of having a cottage are interested," he says. "And a lot of older couples who are getting nothing for their money in the bank want a nice little cottage. An astonishing number of people have cash to buy with. It is a semi that needs just about everything doing to it – plumbing, wiring, new kitchen, bathroom – but it had new thatch in 2005 so it has a good lid."

But how do the sums work now that renovators can no longer build rising prices into their calculations? Are they on a road to ruin, spending vast sums they can never recoup? "I think the cottage probably needs around £35,000 spent on it," says Matthew. "In good times I have sold properties like this at £180,000 or £190,000, but the end value is never going to be more than £210,000. So there is a little bit of jam for people to take. But there are also buyers who aren't worried about making money and just want to live in it." Within 48 hours Chesterton Humberts (01672 519222) had an offer of the guide price and is still receiving more.

It is not just that keeping the money in the bank has lost its attraction. One interesting side effect of the recession is that the cost of hiring builders is dropping, so the cost of building work isn't frightening people away. The consultant E C Harris reported recently that tender prices could drop by 10 per cent in 2009, and by 6 per cent in 2010. In some areas they could fall by as much as 25 per cent over the next three years.

The chance to snaffle a substantial Queen Anne house at £695,000 instead of a million or two has proved impossible to resist. The words "total refurbishment" seems to have titillated interest even further. Brook House at Eastry, four miles from Sandwich in Kent, has nine bedrooms, two bathrooms, attics, a covered courtyard, outbuildings and five acres. "It needs £500,000 spent on it, at least," says Ed Church, handling the sale at Strutt & Parker (01227 451123). There were 149 viewings in less than a month, and last week the agent went to sealed bids.

So do the sums look healthy? In a buoyant market the house might be worth £1.5m to £2m. But these buyers are no longer looking at a two- or three-year turnaround with a quick profit. "Buyers are looking at this as a house they will live in for 30 to 40 years," says Ed. "They are returning to traditional values and looking for a home."

Two beguiling Cotswold properties, Grass Ground farmhouse and Grass Ground cottage at Hailey near Witney, have been setting hearts fluttering. With guide prices of £650,000 and £550,000, there were 80 viewings and offers on each within three weeks. Estate agent Harry Gladwin of Knight Frank (01865 790077) is about to go to sealed bids, as offers already exceed the guide prices. Whoever would have thought it in this market?

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