War of the Roses (and Wisteria too)

To own a big house in the country has been a British fantasy long before Blur sang about it. In fact, it's been an alluring notion for the wealthy since Roman times, when senators built villas to be away from the city stench, and judging by gasp-inducing prices in rural hot spots such as the Cotswolds, the tradition continues.

According to a survey by Halifax, the average cost of a home in the British countryside has increased by 96 per cent (or £102,722) since 2000. OK, so all house prices across the UK have soared insanely in the same period, but the Halifax found that the rural rise was higher than the urban increase, at 91 per cent.

This scenario will get some smirking and others seething. If Halifax is correct, buyers can expect to pay a premium for a rural property. While Suren Thiru, the housing economist at Halifax, talks up the "lifestyle benefits" of the countryside, he also concedes that the "housing market in rural areas has become more challenging over the past decade, particularly for those looking to get on the property ladder" in lower-waged areas. Indeed, the outcome is that a typical rural home now costs 6.4 times average earnings, while in urban areas, homes cost 5.4 times average earnings.

This is creating a two-gear economy in the sticks, with an influx of buyers from cities, such as agent Charles McDowell of Charles McDowell Properties in Chelsea, London, who has recently bought a house in Ampney Crucis, Gloucestershire: the honey-coloured lodestone of British rural fantasy. "We bought there for three main reasons," says Mr McDowell, who lives primarily in the capital. "It has proximity to London in about one-and-a-half hours, it has pleasant architecture and countryside, and there are schools and gastro-pubs."

There's also the inexorable move to wiring up the shires with broadband, making it easier to work in the country; the move to part-time working, making it easier for non-daily commutes, and to a lesser extent, the move to high-speed rail lines, reducing travel times. Plus, some maintain that metropolitan life isn't as removed as one thinks. "I chose to live in a rural area in the borders of Lincolnshire, Leicestershire and Nottinghamshire," says Kate Faulkner, a housing analyst and managing director of the company Designs on Property. "I don't think people appreciate that a rural location isn't necessarily 'cut off' from the rest of the country. I'm an hour and 20 mins from London by train." Indeed, Ms Faulkner also owns a flat in Reading and says that it's "easier, quicker and not much more expensive to get to London 160 miles away than it is getting there from Reading".

Two key brackets are the lifestyle movers – striving for rural solace, space and safe places to bring up children – and the second-home market. The latter has been targeted by launches such as The Lakes, the Raven Group's development in the Cotswolds designed by the property company yoo, to designs by Jade Jagger, Philippe Starck and Kelly Hoppen. "The Cotswolds is a great rural location relatively close to London," says the Raven Group's development director Giles Baker.

It holds appeal for the Notting Hill set, with prices ranging from £810,000 to £2,200,000, an on-site ecology manager and an organic farmers' market. It's a market driven in part by investment, given the low financial returns elsewhere (www.thelakesbyyoo.com). As Sharon Hamilton of Smiths Gore, rural property consultants and surveyors, says: "Wealthy buyers looking in hot spots such as the Cotswolds and the "Golden Triangle" in York prefer their money to be invested in tangible assets like second homes, fine art and antiques, rather than attracting poor interest rates in deposit accounts."

Inward investment of this kind has bought amenities and infrastructure into rural areas, creating confidence for leisure and tourism, and employment. At the same time, it is argued, it makes home-buying more difficult for first-time rural buyers. As well as typically earning less, the average rural dweller needs an average of £18,600 a year to live on. The comparable figure for urbanites is £14,400, according to a new report by the Commission for Rural Communities, mainly because they pay less for transport and fuel.

The Halifax figures show that affordability and supply are a real issue in rural areas. "From a planning perspective, there's a debate about putting houses in smaller settlements where there is demand, against the overall planning mantra of sustainability," says Garth Hanlon, a director of Savills Planning.

He believes the Coalition's localism agenda might mean that local people who need affordable housing will have a louder voice. Ms Faulkner agrees that the village she lives in has "too many large homes and not enough small ones ... in villages, I really notice the ageing population, which poses issues for the future as we desperately need more affordable, smaller homes." She believes there will be a "realigning" of house prices, and large rural properties will struggle to reach "peak" prices.

So could the lifestyle buyers be part of the problem? "The rural property market is being driven by cash-rich purchasers, and the gap between top and bottom-end properties is widening significantly," says Sharon Hamilton. "First-time buyers are priced out of the market both by strong prices in the rural property market and the banks' refusal to lend.

"As the Rural Commission found, there are significantly fewer first-time buyers in rural areas: 27 per cent of sales as opposed to 45 per cent in towns and cities, and less social housing. The country will continue to lure those in search of better lives, including the coming tranche of baby-boomer retirees. We should be careful that their gain doesn't become the rural poor's loss."

Hot spots

North Norfolk

North Norfolk doesn't have particularly good rail links, is patchy in terms of its housing provision and the sea lacks the crystalline freshness of the west coast. But with creeks, marshland and some fabulous beaches, it has become a highly favoured destination for second-home owners. "The area is still largely owned by a handful of landed estates resulting in quite a premium for properties within its pretty flint villages," says Ben Marchbank of East Anglian agency, Bedfords. "Burnham Market is one of north Norfolk's most sought-after addresses: a large, thriving village with handsome Georgian properties set around a grassy Market Place, traditional shops, pubs and barely a high-street chain in sight." As an index of the buying power in the area, Marchbank says: "Over the last year, 63 per cent of our buyers have not required any mortgage."

Cotswolds

With green hills, honeysuckle homes galore and money, the Cotswolds has always been a rural hot spot. It's the largest designated Area of Outstanding Natural Beauty in England and Wales, close-ish to most southern population centres, and its incoming demographic has shifted from Jilly Cooper to Kate Moss. "It is an outstanding place and supply has never met demand," says Sam Butler of local agents Butler Sherborn. "There is a consistent confidence in the Cotswolds. House sales can often be very swift, despite the economic climate."

Yorkshire's Golden Triangle

While prices don't reach the heady heights of the Cotswolds, the area in between Ilkley, Ripon and York that is known as the "Golden Triangle" boasts some ritzy villages that have long attracted wealthy buyers.

"It's well served for the A1 and M1, there are lots of population centres like Harrogate for shopping, and it's a great place to live," says Tim Brown of George F White in Yorkshire. "The hot zone is the A59 between York and Harrogate." Look at villages such as Bedale, Pateley Bridge and Masham.

Affordable Northumberland

"Northumberland is all pretty affordable," says Tim Hawe, at the Alnwick branch of agents George F White. "It's sparsely populated and has lovely towns and villages, both inland and coastal. It's largely undiscovered by southerners, so prices have stayed reasonable." Towns such as Alnmouth and Berwick-upon-Tweed are now being sought by lifestyle buyers and retirees.

Bognor and environs

"Bugger Bognor": supposedly King George V's final words, and even now the West Sussex town and surrounding region have missed out on the pick-up found elsewhere on the south coast. Now it may be coming good, with developments like Bersted Park from Berkeley Homes, just north of Bognor, being fed by the opening of the new tunnel at the Devil's Punch Bowl that has reduced driving times on the A3. "It's a case of an area that was pretty inaccessible becoming more open," says a spokeswoman for Berkeley Homes' Bersted Park. "It has miles of unspoilt beaches."

North Leicestershire

Some of the areas within the East Midlands are undervalued. Take North Leicestershire, which Charlotte Walker, regional director of Stacks Property Search, calls "a well-kept secret". She says: "People get as far as Market Harborough, but no further. It's beautiful countryside with a down-to-earth farming community, and prices are way cheaper than a little further south. You might have to look a bit harder to find the property of your dreams, but there are some amazing villages, the schools are terrific, and it's 90 minutes by train to London."

Stop in Melton Mowbray and look at villages such as Upper Broughton.

Winners and losers in the new rural property economy

Winners

Cash buyers getting good prices for second homes.

Lifestyle buyers seeking solace from urban lives.

Home-workers trading London flats for rural houses (and keeping the urban flat for renting).

Retirees cashing in urban homes and enjoying later years using equity to bolster pensions.

Losers

Local first-time buyers, priced out of an entry point – particularly acute in hotspot areas but also apparent across the country. Plus in some areas, new developments concentrate on large commuter houses, not affordable starter homes.

Villages struggling to attract working age people to maintain services and amenities such as schools.

Non-picturesque rural areas may not attract incomers so miss out as a result of depopulation.

Places with poor transport links that might otherwise be hot spots.