Cashing in, moving out: how the boom is funding a fresh start

Soaring house values have meant a new life for many Brits, says Sonia Purnell

Millionaires' row used to be the term for an exclusive street of palatial mansions with carriage driveways and sweeping private grounds. These days, it could just as easily describe a terrace of fairly ordinary Victorian townhouses in the "lesser" London suburbs such as Fulham or Putney or many whole villages in the more desirable stretches of Britain's coastline (notably Sandbanks, Rock and Salcombe).

Millionaires' row used to be the term for an exclusive street of palatial mansions with carriage driveways and sweeping private grounds. These days, it could just as easily describe a terrace of fairly ordinary Victorian townhouses in the "lesser" London suburbs such as Fulham or Putney or many whole villages in the more desirable stretches of Britain's coastline (notably Sandbanks, Rock and Salcombe).

Million-pound houses are now commonplace in other cities, too - such as Brighton, Oxford, Cheltenham and Bath - and whole swathes of the countryside such as Gloucestershire, Cheshire and Surrey.

Britain's ebullient housing boom of the past 20 years has simply pushed many ordinary properties into extraordinary price categories. No wonder then that 160 new property millionaires are being created every day, equivalent to seven every hour.

The number of homeowners with more than £1 million of equity in their property will treble to 760,000 by the end of the decade and reach almost two million by 2020, according to the Centre for Economic and Business Research. So many people are making such huge sums of money from their properties on this crowded island that millionaires will soon be two-a-penny.

Of course, the doom-mongers, including mortgage companies such as the Halifax Bank and Nationwide building society, are predicting that we're heading for a fall. Warnings from the Bank of England about the possibility of further rate rises are undoubtedly causing concern. Houses are now taking on average 4.2 weeks to sell rather than just four weeks back in May, and the rate of price rises have slowed down.

Yet prices across Britain in general have still gone up between 10 and 20 per cent over the past year - and 30 per cent in parts of the North, thus narrowing the North-South divide - and more people than ever are cashing in on their new-found real estate wealth. The average property rose in value by more than 15 per cent, or £19,000, last year, more than two-thirds of the British average full-time wage.

Some are using this huge equity in their homes to leave their jobs and set up their own business, because borrowing against a house can be one of the cheapest ways to raise finance. A discount mortgage can cost as little as 3.8 per cent in interest compared to up to 20 per cent for a business loan or at least 8 per cent for an unsecured business loan.

Many more are borrowing against the equity to buy a second home abroad - France, Spain, Cyprus and Florida are among the favourite destinations - and one million Brits now own properties overseas.

Others are either withdrawing the money through equity-release schemes to finance a better way of life, buy that long-desired sports car or tennis court, pay off other debts or help offspring on to the property ladder.

According to the Bank of England, homeowners withdrew around £15.7bn of property equity in just the first quarter of this year. That is equivalent to 8 per cent of households' net income, and four times the amount of just two years ago. Thousands are also cashing in to take the chance of a new start in life.

Gavin Quinney, a computer entrepreneur, had sold one house in London and was about to buy a bigger one in Putney. But when he found out that he could buy a fabulous colonnaded stone chateau, beautiful old farmhouse and 75-acre vineyard just outside Bordeaux for the same price (around £1.5 million) he could not resist it.

Although he had always had a passion for wine, Mr Quinney and his wife Angela were novices at actually making it. Yet just five years later, their Chateau Bauduc white is the house white in both Gordon Ramsay's and Rick Stein's restaurants.

The Quinneys were both lucky and skilled in building up their business. Many other Brits have sold up in England to run gîtes or bed and breakfast businesses in France and other countries, only to fail to make a decent living and then tried to return home.

The sheer number of Brits going into this business has driven down the prices they can charge, and left many with gaping holes in their order books. Others have sold their large house in the UK and bought a smaller one abroad, hoping to live on the difference. This plan, too, can run into problems; low interest rates and poor stock market performance mean that returns on money can be very disappointing. Property has frequently turned out to be a better investment.

That has not deterred Britain's growing army of downsizers, who according to a recent survey from the property website assertahome, account for as many as a third of current house-hunters.

"With prices having risen strongly in recent years, downsizers want to cash in on the equity they have built up in their homes to fund a new life," says the site's managing director Jim Buckle.

One west London couple with a large five-bedroom property and a small cottage in the country, for instance, is currently downsizing in the capital in order to buy a larger pad in Devon.

"We just want to re-order priorities in our life and selling our large London house will give us the chance to do that," they said.

"We are going to buy a smaller house round the corner in London that costs about £400,000 less than ours. We also have our eyes on an absolutely fabulous house in Devon where we intend to spend most of our time in future, and will probably spend the released capital on that."

Yet downsizing is not necessarily as easy as it sounds. Estate agents point out that you get much less than half the house for half the money, and people used to living in large rooms sometimes find it difficult to readjust. Others can't get used to losing the privacy of a large, secluded garden when moving to a smaller property.

"We have been looking for years for somewhere smaller that would give us another £500,000 in the bank," says one retired Surrey couple whose current five-bedroom home in a one-acre plot has been valued at £1.5 million.

"But we have found time and time again that once we see these places we don't like them as much as where live now. We don't like being overlooked and so we won't move, even though it makes financial sense to do so."

Another factor is that the traditional destinations for downsizers are no longer as cheap as they once were. Prices in resorts such as Dartmouth, Salcombe, Brighton, Eastbourne and Worthing have all soared - as have those in the North.

Indeed, house prices in the South are now only 1.74 times higher than in northern areas, compared with a peak of 2.19 times two years ago. The North-South gap is the narrowest it has been for two decades, although the average home in the South is still more than £90,000 more expensive than one in the North.

For many too, that dream of selling the Balham townhouse, buying that idyllic Georgian country rectory and still having £100,000 in the bank has ended - probably for ever. Country prices are now much nearer their London counterparts and many Londoners researching a move to the sticks are shocked by how little their money will buy.

Much of the blame for this must lie with the internet, which has meant that more people can work from home without needing to commute into major cities.

One very large house near Salisbury, for instance, belongs to a City trader whose London office number automatically transfers to his country study, where he now conducts most of his business, without the caller ever knowing. He has helped to bring London prices to the town and its surrounding areas.

No doubt people are even now cashing in on the Salisbury boom, and searching for somewhere else to buy where prices have yet to soar. The problem, as always, is finding it.

QUALITY OF LIFE

THE HEANEYS: 'We need to move so that our family can gel again'

At 52, no one could blame Tony Heaney for wanting to move on from his 17-hour working days and six-day weeks as a chauffeur and bodyguard for a wealthy businessman and his family. He is only at home on Sundays and has missed much of his two youngest children's early years.

"I have never even been to their schools," he sighs.

Mr Heaney has not been able to save enough to retire, but he has seen the value of his house in Orpington, Kent, triple in nine years to £300,000. With only a small mortgage on the property, Mr Heaney and his wife Madeleine have decided to borrow some more money against the house to buy a three-bedroom villa in Cyprus, a favourite holiday destination, for around £135,000.

They hope to let the house in Kent next year and move permanently to the village, just outside Paphos, once their son has finished his GCSEs.

The Heaneys love the low prices and the "laid-back atmosphere" on the island, not to mention the spectacular sea and mountain views from their house, and Tony has already started setting up some work for himself.

"I will still need to work, but not as much. Once we've put our savings into this, we will have a mortgage of about £30,000. If we sell up in England, we will have about £70,000 in the bank.

"It's all about quality of life, and no one in England can afford that any more," he says. "We need to move away so that our family can gel together again and spend some time with each other. The value of our house means we can finally do that."

RIDING THE MARKET

WILLIAM AND CAROLINE MORRISON: 'It's been more luck than judgement'

The Morrisons, both 34, have been able to finance a better quality of life largely on the back of not one, but two housing booms. "It's been more a case of luck than judgement," says William modestly.

The couple bought their first maisonette in London in 1998 for £88,000, "at just the right time when the market was bad". A hike in values and a succession of quick moves meant that by the time they left London in 2001, they were able to sell their three-bedroom terraced house in Shepherd's Bush for nearly £275,000 - a large profit.

The arrival of their first son, and the lack of space in London, meant the couple jumped at the chance of a job in Devon. They were able to swap their home in the capital for a much larger one in the country with only a slight increase in mortgage.

The Morrisons were lucky to have bought just before Devon prices really started to motor, and their house has risen in value by 30 per cent in the three years since they moved there.

The couple have just moved again to a large house with seven acres. They have increased their borrowings again, but could never have aspired to such a place without the help of the market and being in the right place at the right time.

TRADING DOWN

JOHN AND HAZEL RENSHAW: 'This money gives us freedom and a buffer zone'

For 26 years, John, a retired company director, now 75, and Hazel, 69, a former headmistress, were very happy bringing up their two daughters in a large, comfortable home with half an acre at Chorleywood, in Hertfordshire. They moved there from Surrey in 1977, paying just £40,000 for the house before spending £100,000 to extend it to a 3,500 sq ft home.

John was happy to stay put, but Hazel worried about managing such a large property as they grew older, so the couple started looking around for alternatives. An increase in value of their house to around £850,000 gave them huge scope to find exactly what they wanted, where they wanted, and still put aside some £400,000.

"We've been prudent and made sure we had good pensions," says John. "But this money gave us freedom and a buffer zone in case we need to pay for care in our dotage, or something we can give to our children and grandchildren."

They now live in a 1,200 sq ft home in a converted farmhouse a mile outside Salisbury, built in 1863 for a Russian Countess who married the then Duke of Pembroke. A new-style retirement development run by Beechcroft, it gives residents both private and communal gardens as well as providing gardeners and cleaners, all for an annual service charge of £2,500.

"We're very happy that we can do this without worrying about it," says John.