We all remember the bad old days. Crippling mortgages, plummeting property prices. But as the market picks up, John Hinton wonders if we have really learned from the past.
Back in the 1980s, the property boom seemed like a trip around a Monopoly board. You bought a property then two years and several coats of Dulux later, you rolled the dice and moved into a better area. It all seemed so simple, but then the game changed. Just as the paint dried on the loft conversion, mortgage costs soared, the recession settled in and house values tumbled by 25%.
Now the game appears to have restarted. A model developed by Professor David Miles of Merrill Lynch and Imperial College calculates that properties in London were overvalued by 32% in 1989 but are now undervalued by 20%.
Eager first-time buyers know it. They are piling in, prowling the streets of the capital in search of their dream flat. House-price increases outside London are less pronounced, but have never-theless risen on average by 31% over the last four or five years.
It's clear that the property market is recovering. What is less clear is whether we have learnt the harsh lessons of the past. Philip Wooller, a director of Leslie Marsh & Co, which handles properties in Brook Green between Kensington and rather less fashionable Hammersmith, thinks we have. He reports an increase in prices in his area of 40% since l995 but no stampede by residents to move into better areas. 'A lot of people are taking stock, having new valuations done, but basically staying put,' he says.
Wooller's view is reinforced by anecdotal evidence. There are still not that many 'For sale' signs around. In the 1980s, by contrast, they made every street look as though it was having a flag day. 'The key difference between today's climate and the previous boom,' says Alison Dean, a director of Savills International, 'is that what is happening is being driven by supply rather than demand.' Miles adds: 'People have an incentive now to buy early. But if prices are rising at an annual rate of 7%, owners may be tempted to wait a bit before selling.' Estate agents may be encouraged by a market on the rise, but with so little to offer it sounds like running a Russian grocery store.
Then there's another perennial dilemma for the poor buyer starved of options - a mansion in a poor area or a shoe box in a posh area? Back in the 1980s, many bought into the 'potential' of the so called up-and-coming areas, often in the hope of renting out the spare rooms and making a mint, only to find a dearth of tenants willing to live amid urban degeneration.
Savills believes that a smaller property in, say, a central area of London - Kensington, Chelsea, Holland Park - is always a safer bet, especially in terms of a rental investment, than somewhere south of the river. True, parts of south London, such as Brixton and Clapham, are becoming gentrified.
But be warned, says Miles: 'There was a period in the early 1980s when people believed any area within striking distance of London would become another Chelsea within five years, but it didn't happen. The fact is there is deep-seated poverty in some of these areas; people shouldn't fool themselves. The most desirable areas are the same as two years ago, areas such as Chelsea and Hampstead.'
So, is what we are seeing another false dawn for the poorer areas? Estate agent Neil Peterman says that Herne Hill - 'the poor man's Dulwich' - is now seeing some prices higher than in 1988, having risen by 10% in the past 12 months. And, unusually for an estate agent, this worries him. 'I didn't want this to happen,' he says. Peterman is concerned that too rapid a rise in the market is, as before, in nobody's interests. 'The signs are there,' he adds. 'We've seen a certain amount of gazumping; some sellers are being greedy. I am worried about another big boom followed by a big bust.'
Even if the game has indeed restarted, however, there are probably still too many people badly scarred by the experiences of recent years for this new game of Monopoly to get out of hand. Cynicism still hangs in the air and no one wants to be hurt again if they can possibly help it.