Property: Too many millionaires

So, you've made it in the City - what now? You buy a big house in the country, of course. But what if thousands of high flyers chase the same dream? Welcome to the new pounds 1m dilemma.

It is more than frustrating to have a million pounds to spend on a house in the country - only to find you are one of thousands. Instead of having an edge on others, you could be lucky if you are only the 10th person viewing it on the first day. If an offer is not made within a week, it's back to square one.

A scarcity of good property combined with demand from affluent buyers has seen values in the country- house market grow by 3.3 per cent in the first quarter of this year, according to FPDSavills Research.

The strongest growth is in the Home Counties, at 4.1 per cent, and it is here that the million-pound scramble to buy is at its most intense. Knight Frank, the property consultants, have on their books at present more than 2,000 people with pounds 1m or more to spend on a country home.

At Strutt & Parker's Newbury office, of the 1,000 or so people registered, 200 would-be buyers are in the pounds 1m-plus bracket. The effect of such hot competition means that those who are just able to manage the asking price are more than likely to be outbid.

The greatest elasticity, says Gavin Selbie of Knight Frank's Tunbridge Wells office, is among those purchasing at around pounds 1.25m. "They may offer a one-off bid to take the house out of the market or they could find themselves bidding against others. But whatever the means, we are seeing some very exciting prices."

He sees a wide gap between the best and the rest. Salwarpe Court, near Droitwich Spa in Worcestershire is a listed, half-timbered house typical of the kind of place that draws in buyers like bees to a honey pot. A pretty manor house in pristine order, grand without being overpowering, with tennis court, swimming pool and paddocks, situated in a village five minutes from the motorway, it is on the market at a guide price of pounds 1.2m.

Despite the location, the interest shown would not be the same if it were a rambling, run-down pile. Stuart Flint of Knight Frank, the selling agents, says that manageability is a real issue.

"Seven bedrooms are better than 10, and one cottage preferable to three. Buyers do not want to spend their money on unnecessary space. They want to cap their investment and are not inclined to take on anything that needs a lot of work."

Lane Fox, estate agents, put price rises in southern England this year somewhere between 5 and 7 per cent. The standard wish list of five-plus bedrooms, tennis court, paddock, and a quiet location near a station is producing up to 50 viewings, with prices going well over the guides, says Henry Holland-Hibbert.

Strutt & Parker recently sold two properties within a matter of days. Both were as close to the dream country house as is possible to get. River Barn in Longparish, Hampshire, went on the market for just over pounds 1m. A lovely house in an idyllic village spot, it had 35 viewings and, within three days, four people bidding for it.

In Dorset, Langham House, a mainly Georgian house in farmland, was being marketed at pounds 1.1m. There were 300 calls following a Country Life advertisement, and three days later it had sold for between 25 and 30 per cent more than the asking price.

So who are these buyers? James Laing of Strutt & Parker breaks them down into two categories: professionals who can borrow against high salaries, and those who have done well out of a business. "A City high-earner can sell a house in London for pounds 600,000, pay back pounds 100,000 to a building society which then lends them pounds 500,000. It would cost about pounds 35,000 a year at today's interest rates - which is fine out of a salary of pounds 250,000.

"The other kind of buyer may have left school at 16 to work in the accounts department of, say, an electronics business. He works his way up to finance director of a company that changes hands a few times, giving him share options every time it passes go. The company is then bought by an American conglomerate, and the director's share is now worth pounds 4m. These sorts of cases have had a far greater effect on the market than City bonuses," says Laing.

Over-demand at the top of the market is beginning to filter down to those properties with drawbacks. "If a house has a problem, this is the best time to sell," he adds. There are signs that this is the case. A house of a singular architectural design that took two years to sell on the last occasion has just been sold for more than the pounds 1.25m, says Knight Frank, while those buyers who are still sensitive to any blight, whether pylons, farm-smells, or railway lines, are having to rent or stay where they are for longer than they envisaged.

Jonathan Harington, who runs the private clients' buying department at Knight Frank, believes making money and buying a place in the country is a very English thing. "But supply will never be able to meet demand. As well as newcomers to the country, there are those who grew up there and wish to return with their own families. I warn clients that they have to compromise in some way. If a house has seven points out of 10 they should go for it. Road-noise and badly placed footpaths are the main problems, and if you take those properties out of the picture no wonder there is a scramble for the best. You must get in first."

Strutt & Parker: 0171-629 7282; Knight Frank: 0171-629 8171