Confidence still fragile in housing market

The feelgood factor: Homeowners staying put as lack of job security blamed for continued property slump

Alex Centro finds it easler to sell expensive properties in north and west London than he does those at the lower end of the market. Confidence among buyers with modest incomes is still very fragile.

Despite yesterday's cut in the interest rate - the third in the past four months - and last month's 0.9 per cent rise in house prices, many buyers are still too worried about job security to venture into the property market.

Mr Centro, sales manager for Oakleys estate agents, said: "It is not interest rates which are the problem, it is job security. People are not going to commit themselves to a 25-year mortgage when they have only got a job contract for one year."

"Things are improving slowly but surely. The top end of the market is going pretty well and we are looking for more property to sell at that end, while the less highly valued areas are more difficult."

Throughout the economy, the picture is one of a cautious recovery, with people being choosy about what they buy and both families and businesses very wary of committing themselves to bigger outgoings.

Jonathan Bastable, of Burrough & Company, an estate agents in Newbury, Berkshire, said: "I don't think you can say interest rate cut, therefore improvement in the property market.

"But it will have a cumulative effect on property values and increase confidence."

"A quarter of 1 per cent off interest rates does not mean a dramatic difference, it is just a continuation of the general improvement in the market that has been going on around Newbury for 18 months to two years now."

A spokesman for Dixons, the electrical goods group, said: "The interest rate cut is not likely to have any immediate effect on sales.

"In the longer term it might stimulate sales if the housing market was to pick up. However, consumers are spending selectively and there is no evidence of a feelgood factor along the lines of that experienced in the 1980s."

The department store chain John Lewis, which sells many household furnishings , reported a 9 per cent increase in sales last year and believes that that confidence is slowly starting to return to the High Street.

Stuart Hampson, the company chairman, said:"The early years of this decade caused us real pain as the property sector went into decline, but in this third year of profit growth we have felt distinct signs that customers are feeling more confidence and are getting back to investing in their homes."

"What we are seeing now is no repeat of the 1980s but the property market does seem to be on the move again. Some people are finding it suits them well to take rented houses rather than buying ... and more people are able and willing to invest in their existing homes instead of moving."

But the rate cut was greeted without much enthusiasm by shoppers yesterday. Carolyn Putter, a teacher and mother of two from Newbury, said: "I suppose it is a move in the right direction but I would think there have got to be more significant moves in the right direction for it to take effect."

Belinda White, a pensioner from Marlborough, Wiltshire, said: "I think it is awful news. I am living on my investments. Our investments go lower and lower and all our bills go up and up.

"Quite honestly, I think the Government ought to go."