EQUITY QUANDARY

On average, says the Pru, a retired homeowner has £194,177 worth of equity in his or her home.

With mainstream pundits mainly predicting house price movements of 0% to minus 5% for 2008, this suggests older people will be at most about £9,000 poorer "on paper" by the end of 2008, if the worst of these figures materialises.

However, the Pru sees a wide regional variation in the fortunes of retired homeowners: while those in South-east England saw the equity in their homes rise £5.9 billion in the third quarter of 2007, those in the West Midlands saw a fall of £56 million.

In London, South-East and South-West, 1.5 million pensioner households owning homes outright are sitting on a mind-boggling £387 billion of equity.

Of course, how to get that money out of homes and into owners' back pockets in a tax efficient way is likely to be a key question of the 21st century.

Even after the Government's controversial move this autumn to allow couples a joint Inheritance Tax (IHT) allowance of £600,000, a big slice of that wealth is probably still heading for the taxman - unless, of course, homeowners manage to reduce the value of their holding before they die.

That's where the controversial issue of Equity Release comes in.

The Pru's new lifetime mortgage, for homeowners aged 55-84, offers an initial advance of at least £10,000, in a Drawdown Plan with additional top-ups of at least £3,000 a time.

Interest rates currently range between 6.63% and 7.10% on Pru Equity Release mortgages, which roughly double the value of any advance after 10 years. That's why many financial advisors tell older people to unlock equity instead by moving to a cheaper home.

:: INFORMATION: Prudential (0800 389 0173).

:: MORE HOME PACKS BOOST WORKLOAD FOR HOME INSPECTORS

The Government's decision to extend its Home Information Packs (HIPs) to one and two bedroomed homes from December 14 covers the entire market with this controversial scheme.

It means all sellers face an additional cost of £350-£500 to put their homes on sale- and could lose the money if no sale is agreed.

Jeff Smith, chief executive of HIP Payment Services which offers deferred payment schemes to HIP providers and estate agents, claims the move is welcome - because it switches the cost of gathering information on homes from buyer to seller, easing the burden on hard-up first time buyers.

Estate agents are less impressed. Says Stewart Lilly, president of the National Association of Estate Agents: "Unfortunately this shambles could cause problems for a while to come.

"We remain absolutely convinced HIPs are not the way to improve the home buying and selling process or to deliver the important energy performance certificates (EPCs) which they include. HIPs just waste everybody's time."

Lawyers are scathing too. Says Jeremy Raj, Head of Residential Property at Wedlake Bell: "We have seen no discernible benefit so far from HIPs in terms of speeding up the conveyancing process or delivering a fairer deal for buyers.

"In fact, in many cases, things have been slowed down noticeably because of the teething problems arising from the introduction of HIPs."

Two major themes are emerging in the bitter argument between backers of HIPs, and opponents.

First, will anybody actually read them and act on the information?

Though HIP supporters say they bring "transparency" much earlier in property sales and will slash notional losses of £1 million a day from sales which collapse before exchange, an agent in Winchester, Hampshire, says not a single one of his sellers has so far wanted to see the HIP they paid for.

The charitable view is that EPCs compiled by domestic energy assessors (DEAs) as part of HIPs might encourage energy efficiency improvements by the new owners.

Secondly, will HIPs accelerate the drastic fall in housing market turnover predicted in 2008?

Once it decided to add another tier of bureaucracy to the housing market, Government probably had little option but to cover the entire market - for individuals and small companies on the new HIPs production line have been going bust because of lack of work.

Now, in theory, thousands of pounds in training costs spent by home inspectors and DEAs could at least begin to generate some sort of return.

However Trevor Kent, the Gerrards Cross agent who has long opposed HIPs, says a surge in listings of smaller properties in the week before December 14 - to beat the new deadline - caused "havoc" in the market.

Citing figures from Rightmove, the housing data agency, Kent argues HIPs can be blamed for £2,000 worth of the average house price fall of £7,590 over the last past month.

Kent says that if Government stands by its current June 1, 2008 deadline for First Day marketing - ie homes will not be allowed to go on sale beyond that date unless their HIP is completed and ready to be inspected by would-be purchasers - then there could be acute problems for owners trying to sell fast because of financial problems.

Says Kent: "Some owner occupiers, and buy-to-let landlords too might have to sell quickly in 2008 if financial conditions deteriorate and leave them over-borrowed.

"They will be amazed - and shocked - to be told by an agent that their property can't go on sale for at least a fortnight while the HIP is completed".

:: INFORMATION; HIPs, first introduced in August, must include an Energy Performance Certificate compiled by a domestic energy assessor (DEA), a sale statement, local authority searches and evidence of legal title.

Details of The Association of Home Information Pack providers (AHIPP) representing members in conveyancing, estate agency, search providers and HIP providers, can be found online at www.hipassociation.co.uk

:: ARE RENTS RISING - OR SET TO FALL?

Buy-to-let investors enjoyed total returns during 2007 - measured by adding rising capital value to rental income - of 21%, the highest figure for 28 months. Invested in FTSE shares instead, their return would have been just 7.4%.

So claims Paragon, a leading lender to landlords, which says the buyer of a property purchased for an average £162,300 in November 2006 collected a return of more than £34,500 in the past year.

Regions showing the best returns for landlords include London, East Midlands and South West. East Midlands enjoyed the fastest annual growth in rents, while Yorkshire and North-West achieved best yields during the year at 6.8%.

Says Paragon's John Heron: "Both rents and property values have grown strongly over the past 12 months. Looking ahead, we can expect further upward pressure on rents as first time buyers remain in rented accommodation for longer."

However figures from Hamptons International Mortgages cast a different light on buy to let.

They say landlord demand for mortgages has dropped sharply, but there has been a marked rise in the number of landlords remortgaging properties to take cash from their property.

Hamptons' Jonathan Cornell thinks an explanation is that landlords want to leave rents unchanged - either to retain existing tenants, or to attract new ones as fast as possible to avoid "crippling void periods" in 2008.

Hamptons thinks landlords' decision to stop adding to portfolios came almost overnight; they accounted for nearly 44% of Hamptons business in October 2007, just 18.38% in the following month.

Says Jonathan Cornell at Hamptons Mortgages: "Some buy-to-let" landlords have had their confidence dented in the recent credit crisis. Amateur landlords will have suffered the most and many may have held off from buying new properties."

Cornell thinks landlords may have been remortgaging "in order to reduce the rent they charge with the intention of retaining long-term tenants".

That's a different story to Paragon - but for landlords with large portfolios to maintain, it probably makes sense. The vital thing in current circumstances is to ensure every property keeps generating regular income.

:: INFORMATION: Hamptons Mortgages (020 7220 1004).

:: "WAITROSE EFFECT" LANDS IN CREWKERNE

A £10 million conversion of a 250-year-old brewery in the South Somerset town of Crewkerne is selling steadily to local buyers and long-range investors alike - and sales director Nigel Hodder blames "the Waitrose effect".

"Crewkerne is only a 25-minute drive from the coast around Lyme Regis, and offers a main line rail service directly into London Waterloo," he says, "But Waitrose's decision to open here in 2008 is a critical factor, because its name is taken as a sure sign of an area on the way up."

Property entrepreneur Tim Wadsworth devised a scheme to turn the 250-year-old brewery into 76 cottages, town houses and apartments, using local stone and recycled materials wherever possible.

Barely 20 units remain and Nigel Hodder, sales director of a joint venture between Hydon and Kenmore Homes of Winchester, has been revising his prices to make sure the whole lot is sold by next March.

In the old brewery building, two bedroomed duplex apartments start at £145,000, while three bedroomed new build cottages in Victorian style start at £174,950. More cottages carved out of a converted barn start at £149,950.

Says Hodder: "Investors find the scheme achieves rent levels considerably higher than those in the locality.

"A buyer of a one bedroomed apartment was advised he would get about £590 per week, but the letting agent suggested £690. He actually opted for £650 - and got a tenant within two days."

Meanwhile Tim Wadsworth already has his next conversion lined up: Tonedale Mill is a former textile mill at Wellington, near Taunton, which was established by the Fox family (of khaki cloth fame) in 1790, and only ceased operations in 1990.

That scheme goes on sale in March 2008 - and with one bedders expected to start around £115,000, expect to see investors competing with local first time buyers.

Both schemes underline a lesson for 2008: there will be sound investments to be made in the housing market, but shrewd buyers will have to look a little harder to find them.

:: INFORMATION; Hydon is handling sales for both schemes, in Crewkerne and Wellington, on 01460 75278.