Why aren't people snapping up country homes in East Anglia?

On a graph comparing regional property prices over the past decade East Anglia rises like the Matterhorn in 1988, a high peak above the national average. Now, eight years later, the region lies in the lowlands, under- performing the general trend. If you were an old-fashioned property speculator, you would surely be buying into East Anglia.

So why aren't people snapping up country houses with 10 acres for under pounds 300,000? The answer seems to be that East Anglia is a microcosm of the new property market where the old rules do not apply. Just because it was expensive no longer means it will necessarily be expensive again.

Between 1985 and 1988 property in East Anglia rose 240 points from a base of 100, according to Savills Residential Research. In 1988 alone prices went up 50 per cent in Norfolk. Savills' Norwich office sold an old rectory in the south of the county for pounds 435,000 at the height of the boom. In late 1993 they re-sold it for pounds 280,000. Today the same house might fetch pounds 315,000 - a small increase, but still 25 per cent down on the peak.

The Nationwide Building Society, whose figures are based on the mainstream market rather than on country houses, says the drop is even more dramatic in its sector. In January's housing finance review, the Nationwide said prices in East Anglia were still 30 per cent down on the peak of 1988. By the end of the decade, they are still expected to be 15 per cent down, with owners caught with negative equity. "By the year 2000 it is possible that a rump of negative equity cases will remain, with East Anglia likely to be one of the worst affected areas," the review says.

But this gloomy view of low prices and slow recovery is only half the picture. It applies only to those parts of East Anglia - the Fens, much of Norfolk and north Suffolk - which lie away from the coast and beyond the normal commute.

Elsewhere, in the prime parts of the region, the picture could hardly be more different. On the north Norfolk coast, the Suffolk coast, in the smart suburbs of Norwich, in the Stour Valley and, more than anywhere, around Cambridge, buyers are lining up to buy period property. Where houses are cheap there are no buyers, where they are expensive, there are no sellers.

Estate agents who handle good quality homes in and around Cambridge dusted down their forms for "best and final offers" - where buyers are competing for the same property - more than two years ago. Though 1995 saw a dip in activity, the competition has resumed this year. James Barnett of Savills in Cambridge is one of many agents who claim they cannot get enough good quality houses to satisfy the demand. "We go to best and final offers nine times out of 10 on decent family houses," he said. "Each time you see the same buyers, minus the one who got the last house, with a few new ones, too."

Savills put a price tag of pounds 355,000 on a thatched country house with four bedrooms and three reception rooms in a village just outside Cambridge. It sold, under competitive bidding, for more than pounds 400,000. Such is the demand that agents are increasingly doing private sales, in which they find a buyer for a property without ever putting it on the market.

In Cambridge itself, where family houses are in even shorter supply and the university always lurks in the background as a potential bidder, prices have risen even faster than in the villages. Bidwells, which has offices across the region, has charted the price movements of a Victorian semi- detached house in the town and a country house south-west of the city. Danesbury House, a four-bedroom, three-reception-room village property would have been more expensive than the Victorian semi in 1985. Now the village house is for sale at pounds 227,000 having appreciated by 214 per cent, while the town house is priced at pounds 245,000, a rise of 253 per cent.

Similarly, in south Suffolk demand for good family houses in areas commutable to London has outgrown supply. Mark Oliver of Savills in Ipswich said prices in the Stour Valley, with good rail links to the City, fell by only 20 per cent in the recession and have nearly recovered in the past two years. However, in north Suffolk prices crashed by between 35 and 40 per cent and have barely risen off the bottom since then.

So why the great divide between the popular and unpopular parts of the region? Bidwells sees this as a clear-cut example of the way the property market has fractured. The areas which are prospering are those with a strong jobs market or within easy reach of one. The houses which are selling are the prime ones. In the past, those buyers frustrated by the lack of choice and high prices in their favoured area would have looked further north and east. Now they either buy what they want or they don't buy at all.

"People are not prepared to travel so far," said Mark Oliver of Savills. "The 'grab everything' years are gone. People don't want a long journey. They want to see their children during the week. They are interested in their quality of life." He believes people will not go beyond the maximum commute of one and a half hours. "Places which are too far away from the station or from a good road are of no interest."

The "good" road in Norfolk is the A11 which has been upgraded in recent years. However, the end of the government's road-building programme means the dual carriageway stops short of Norwich, prompting fears that businesses may move nearer to Cambridge.

Mark Stewart, who runs Bidwells' Norfolk office, said demand for the best properties is now stronger than it has been for years and, as a result, prices look set to rise. They have a long way to go. "We have very few houses which sell for in excess of pounds 350,000," he said. "A few years ago that figure was pounds 500,000."

So what can you get for your money? Savills in Cambridge has just sold a 9,000 sq ft country house with a lodge, three self-contained flats, a lake and five acres for under pounds 300,000 in the Fens. Bidwells in Norwich is about to market a four-bedroom, four-reception-room period cottage with a tennis-court near Blakeney for pounds 220,000. The speculators may not be moving into East Anglia, but other buyers will find the region looks very good value.

Savills Cambridge 01223-322955, Norwich 01603-612211; Bidwells Cambridge 01223-841842, Bury St Edmunds 01284-767338, Norwich 01603-763939