THE TOP AND THE BOTTOM OF THE MARKET

"At the top end of the market, buyers with £5 million-£10 million to spend on a house aren't spending all they have and almost certainly aren't dependent on a traditional mortgage. They are typically worth £30 million, and looking to buy a home for the next 10 or 20 years.

"If they see the right thing, they are quite prepared to pay over the odds for it, because it is a rare opportunity.

"One example of this is Duntisbourne House, a gem of a house with lodge, flat and 70 acres in Gloucestershire craftily marketed by agents Strutt and Parker with a guide price of £5 million.

"Over 70 people viewed it, and a sale north of £8.5 million is understood to have been agreed."

Dale Norton, group managing director of estate agents Romans with 15 offices in the Thames Valley, says: "The housing market is facing a series of adverse factors which combine to make as big a mess as I have seen in more than 20 years in the business.

"Up to £500,000, there are homeowners hit by soaring bills - petrol, food, council tax - which means they will probably have to move down. Problem two is the ending of fixed mortgage rates, to be replaced by new rates significantly higher.

"Thirdly, there are negative vibes about everything at present. And lastly, people still in good jobs - and keen to move - are inclined at present to sit on the fence in case prices go lower.

"Meanwhile first time buyers have it as hard as any time in the past 15 years. Unless they have a significant deposit, lenders just don't want to lend to them."

Mr Norton says the his rental operations are "amazingly strong. We are managing rentals on about 2,500 properties and simply can't find enough. There are so many tenants ready to pay £800-£1,000 per month, who in normal circumstances would get a mortgage.

"The positive thing about the present situation is that many people do still want to buy. It is not like the late 80s, when the market went completely dead. People really do want to buy, providing it is at the right price.

"Maybe the Bank of England can kickstart things again with a rate cut."

Trevor Kent, running a single branch agency in Gerrards Cross, Buckinghamshire, says: "First time buyers told they need a deposit of 25% are obviously in a very difficult fix.

"Above £300,000, the market is more active, because older people are selling and moving down to reduce their liabilities, and often taking advantage of some excellent offers from builders on brand new flats. Meanwhile younger families and high-flying company people are taking profits in London and taking children out to the country and spending upwards of £500,000 for the right thing."

:: TENANTS BATTLE TO REGAIN DEPOSITS

Only a handful of cases seem to be finding their way through arbitration schemes begun a year ago, supposedly to better protect tenant deposits against landlords keen to keep all the cash at the end of a tenancy.

The Tenancy Deposit Scheme (TDS), one year old on April 6, ensures all deposits on lettings go to a third party, and are subject to independent arbitration if there is disagreement about division of the money when tenants leave.

Three different TDS schemes cover the market: the first, administered by the Association of Residential Letting Agents (ARLA) covers nearly 450,000 tenancies, nearly 700,000 tenants in homes owned by 335,000 landlords.

From just over 1,000 disputes submitted to its Alternative Dispute Resolution during 2007, some 333 went to adjudication judgement, and ARLA spokesman Malcolm Harrison says subsequent judgements "broadly" divided the money 32%-68% between landlords and tenants respectively.

The second scheme - mydeposits.co.uk, operated by the National Landlords Association (NLA), with 14,000 individual landlord members around the UK and over 80 local authority associate members, and holding 200,000 individual deposits - recorded 341 actual disputes.

Just 64 went to Alternative Dispute Resolution (ADR) process, hearing evidence from all parties. In 86% of cases, the ADR ruled in favour of the tenant, with 45% of tenants getting the full deposit back and 41% regaining part of their deposit.

In just 11% of cases, landlords and letting agents kept the entire deposit.

Says David Salusbury, chairman of mydeposits.co.uk: "After only 12 months, it is clear tenant deposit protection has clarified the rights and responsibilities of tenant, landlord and letting agent.

"With so few disputes actually being notified and only 20% of these requiring external adjudication, it seems this kind of self-regulation is proving extremely effective."

The third tenancy deposit protection scheme, run by Computershare, is for landlords not in the first two versions.

The relatively low number of complaints reaching arbitration may mean landlords swiftly capitulate in a dispute - and give money back if tenants complain.

That's possible - but a likelier explanation is that only landlords and letting agents happy to play by the rules are signed up to regulation schemes, while 'wide' boys continue to operate outside the law.

Says one close observer of the private rented sector: "Tenants should be told clearly about the new scheme, and should report any landlords who fail to sign up to one of the schemes. For landlords fail to comply with the new system, penalties are draconian.

"In fact, many tenants don't know what their new rights are, and Government has done little to educate them. The bad boys of residential lettings are unlikely to get caught out, while responsible agents and landlords who observe the rules have fallen in line."

Unless all tenants insist on finding out who holds their deposit at the beginning of a tenancy, the new system devised to protect their money might have little real impact in rooting out real 'rogue' landlords.

:: INFORMATION: The Tenancy Deposit Scheme operated by ARLA can be viewed on www.tds.gb.com by clicking on the clapperboard marked TDS Overview; the NLA scheme is detailed on www.mydeposits.co.uk

Despite the gloom, the latest quarterly review from ARLA, for the quarter ending March 31, suggests landlords are still seeing good returns on their investment.

ARLA says investors' annual return on a geared (mortgaged) investment is running at 21.7%, up by 0.27%, while the return on cash purchases averages 10.91%. All returns are calculated to include capital appreciation and rents.

This quarter, the number of investors reporting a significant impact on the rental market due to immigration has increased by nearly 10%, since the question was last put to them at the end of 2006.

:: BUILDERS CUT BACK PLANS FOR NEW HOMES

The number of new homes started in the quarter ending in February shows a steep 22% fall in the same period of one year ago- and raises huge doubts about Government exhortations to builders to drastically increase output.

Figures from the National HouseBuilding Council (NHBC) reveal nearly 35,800 applications to build new homes in the three months to the end of February - against 45,613 for the same period a year ago.

The fall was sharpest - 24% - in private sector homes for sale. However the number of new homes completed for housing associations fell by just 11%, from 8,100 to 7,200.

It would be understandable if builders are cutting back production of homes for sale - in case they are caught with unsold stock later in the year.

The latest Housing Market Report (HMR) from the Home Builders Federation (HBF) shows new home prices continue to fall while builders have to step up their use of sales incentives.

The HMR says new home site visitors and reservations in February both showed falls on a year ago - with conversion rates of visits into firm sales probably falling because of problems in getting mortgage finance.

However a small majority of builders - plus 6% - still expects to increase new home sales during 2008.

The HMR also confirms the sharp fall in new house starts; it reckons the January/February figure was 30.4% down on the same period of 2007.

Between 2000 and 2007, the flat share of private housing allocations soared from 21.1% to 42.6% of total starts. The share of detached houses plunged from 50.6% to 23.1% over the same period.

Possibly, this amazing switch might come to the rescue of some builders - because there is an acute shortage of good-sized new family housing in many areas.

:: 'REPOS' BEGIN TO FLOOD INTO AUCTIONS

The level of repossessions in the latest Andrews & Robertson/Willmotts auction specialising in London and the South-East at London's New Connaught Rooms on April 16 suggests a serious number of both home-owners and investors already coming unstuck.

Sales on behalf of mortgagees include a two bedroomed bungalow on the Isle of Sheppey, Kent (guided at £125,000); a three bedroomed flat on the seafront in fast-improving St Leonards on Sea (£100,000) and a newish first floor two bedroomed flat in Eastbourne's Sovereign Harbour development which looks an attractive bolthole (£125,000).

There might also be potential in a two bedroomed ground floor flat in Daubeny Gardens, Tottenham, North London (guided at £130,000-plus).

No wonder Jonathan Moore, head of marketing at specialist buy-to-let lender Mortgages for Business, says professional investors with portfolios are remortgaging their existing stock to raise equity for fresh purchases.

Some lenders, he says, still offer buy-to-let loans up to 85% loan-to value (LTV).

:: INFORMATION: Mortgages for Business (01732 471 600); Andrews & Robertsons/Wilmotts (020 7703 4401).