THIS is a tale of two cities. In the first, the Russians are among the minted — and sometimes world-famous — foreign purchasers of £1 million-plus properties. The average price per square foot of all homes has risen by 11 per cent over the past year and 173 per cent since 1996, driven by a scarcity of properties for sale and demand from workers in financial services.

No, this is not London, but Edinburgh, although the Scottish market’s performance does rival that of Chelsea, another place the Russians like. Prices in Scotland are up 7.5 per cent since January and 22.4 per cent over 12 months, according to the Bank of Scotland.

Like everywhere else, the future direction for the market in Edinburgh depends on a decision being taken in London on May 10 when the Bank of England rules on interest rates. Scottish homes may be the most affordable in the UK, but incomes have not kept pace with the growth in values; more expensive borrowing will dampen the enthusiasm of most buyers — with the exception of the Russians.

But longer-term prospects could also hang on the outcome of next Thursday’s Scottish Parliament elections. Success for the Scottish National Party (SNP) would put independence on the agenda. The SNP believes it can fund public expenditure if it controls oil tax revenues. But this scheme could be at risk as North Sea production decreases — which would have implications for employment, the economy and the housing market.

In our second city, the problem is real estate glut rather than shortage. There is a growing oversupply of one and two-bedroom flats in the centre of Liverpool, which is dispiriting news for investors in these properties. The average price in Liverpool — next year’s European Capital of Culture — may be 9 per cent higher year-on-year, but some apartments have fallen in value.

Many investors are not receiving enough rent to cover their mortgages; others are leaving their flats empty. One aim of Liverpool’s construction boom was to build new communities; but dark, untenanted apartment blocks do not a

friendly innercity neighbourhood make. When Bricks and Mortar raised concerns about this trend last June, the developers’ PR people got hot under the collar; they are no longer even trying to put a positive spin on the situation.

Liverpool’s experience should serve as a lesson to companies involved in any new home developments planned for this city, and for Edinburgh. If city centres are to thrive — which is in the interests of everyone (including investors) — they need families, who are mostly not that keen on loft-living. It’s a preference that goes beyond regional differences.

HIP, HIP, HOORAY?

Home information packs (Hips) become compulsory for all sellers on June 1. But even at this late hour, the opposition parties are refusing to see the scheme as a fait accompli.

Next Thursday a House of Lords committee delivers its views of the Hips reforms. If these are not flattering, the Conservatives will try to block the project, which they describe as “expensive and deficient red tape”. The Royal Institution of Chartered Surveyors (RICS) is even more blunt, describing the regulations as “impenetrable, unclear and contradictory” and predicting they will damage the housing market.

The Lib Dems could be the Tories’ allies. The Government, meanwhile, lists the Energy Saving Trust, Friends of the Earth and the WWF as supporters of the energy performance certificate (EPC) element of the Hip. Ministers

continue to insist that Hips will be introduced on June 1 and that there are enough trained inspectors to complete the EPCs.

Homeowners could be forgiven for seeing this row as the premature start of the silly season. But they will take a very different view if the Government prevails, Hips go ahead and it emerges that not only are there insufficient numbers of inspectors but also that Hips paperwork actually slows transactions. The Government is promoting EPCs as a key antiglobal warming policy. If ministers suspect the plan is half-baked (for this will be the headline if anything goes wrong), they must make concessions now.

ONE RISE IS ENOUGH

The expectation that interest rates will rise again next month is so widespread that the focus of speculation is now whether the Bank of England will think one increase enough. It could conclude that two are necessary. But the latest Nationwide survey, which shows prices accelerating this month, gives warning that two upward moves could destablise the market, as it would put pressure on borrowers with tracker mortgage deals that vary with the base rate.

I think, however, that the Bank will be less inclined towards a second increase if it studies the fine detail of Nationwide’s other findings, which suggest that demand is slowing in most places. Part of the fascination with the boom in spots such as Central London stems from the reason that things are pretty quiet in many locations.

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