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North-South divide: The Carney dilemma - how do you solve negative equity without bursting bubble?: The Bank governor could raise rates to cool the south's market, but prices will still be falling in the north, writes Hilary Osborne
[May 17, 2014]

North-South divide: The Carney dilemma - how do you solve negative equity without bursting bubble?: The Bank governor could raise rates to cool the south's market, but prices will still be falling in the north, writes Hilary Osborne

(Guardian (UK) Via Acquire Media NewsEdge) On Carney Street in Boosbeck they don't really talk about house prices, says Ashleigh Naylor, a newly qualified nurse who lives halfway along the tiny terrace: "When you buy a house here, you buy it then stay in it, for 30 or 40 years." It is probably just as well, because those who do need to sell for any reason are still suffering from the downturn that started in 2007.

Estate agents in the North Yorkshire town say average prices are still around pounds 30,000 off their peak, and when properties do come on the market sellers face a long wait for a buyer. No 4 Carney Street recently sold after 15 months, and then only after the asking price was slashed to pounds 29,950.

The average UK home, according to last month's Nationwide house price survey, is now worth more than 10% more than a year ago. Some august members of the Bank of England's interest rate-setting committee have warned about the dangers of what many are describing as a house price bubble. This month the deputy Bank governor, Sir Jon Cunliffe, said it would be dangerous to ignore the momentum in the market, adding: "This is a movie that has been seen more than once in the UK." Governor Mark Carney is more equivocal, but takes every opportunity to make it clear he is watching price rises carefully.

But that all seems a million miles away from this street in Cleveland. Land Registry records show the highest price ever achieved here was in 2012, when the three-bedder at number 10 sold for pounds 65,000. Prior to that, as the market approached its peak in 2006, number 8 went for pounds 62,000, almost double the pounds 34,000 it changed hands for three years earlier. It would likely fetch less today.

Across Redcar & Cleveland, prices remain well below their level in November 2007, before the credit crisis hit. That month, the average price of a home in the region reached pounds 130,000. After that prices went into reverse, reaching a low of pounds 96,500 in December 2012. In March this year the average value was just pounds 98,770, down 0.8% on a year ago, and 24% below the peak.

Hannah Parkin, visiting a friend on Carney Street, is trying to sell a house in nearby North Skelton: "They're coming to value it tomorrow. I paid pounds 85,000 for it six years ago and last year it was valued at pounds 75,000. If I want a quick sale I'll probably have to put it on for pounds 60,000." On Boosbeck High Street Terry Agar hopes to buy the modern house he is renting for his family but the landlord is not in a position to sell because he is in negative equity. "A house further along just sold for pounds 136,000 and our landlord paid pounds 170,000 so they can't sell it yet." Lee Ingleby, an estate agent who covers the area from nearby Saltburn-by-the-Sea, says the crash wiped out first-time buyers overnight: "We lost them because they didn't have the 20% deposit being asked for." He says they are returning now that 95% mortgages are available again.

Naylor was one of those first-time buyers. She bought her home two years ago from a family friend. Her father had to act as guarantor to get her a mortgage, but now she has qualified as a nurse she is taking over the loan. She's fairly typical of buyers here who, agents say, tend to come from within a 10-mile radius.

But Saltburn-by-the-Sea attracts buyers from far and wide, with its golden beach and streets dotted with independent shops; a seafront flat is priced at pounds 280,000. But the overspill doesn't reach the four-and-a-half miles to Boosbeck.

Round the corner from Carney Street, another local agent, Kay Richardson of Hunters, is marketing a generously proportioned family home for pounds 149,950 - down pounds 25,000 since she took it on from another agent. It's on a hillside with a view across to the sea from one bedroom and rolling hills from another. Some rooms need sprucing up, but a new stair carpet and real parquet floors in the kitchen must have impressed the potential buyers who have come since it went on the market in February.

There's been some interest, says Richardson, but they all need to sell homes first, and things just aren't moving quickly. If the Bank of England raises interest rates to cool the market in the south it would be a disaster, she adds. "People round here don't have a lot of money, so any increase is going to have a significant effect. Our first-time buyers will disappear but people will still need to move. They'll find the only way to sell their property is to cut the price, so we'll have more negative equity." Captions: 24% The average drop in house prices across Redcar and Cleveland since they reached their peak in November 2007 Carney Street in Boosbeck: average house prices remain pounds 30,000 off their peak, and one recently took 15 months to sell Photograph: Mark Pinder for the Guardian (c) 2014 Guardian Newspapers Limited.

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