THE GOVERNMENT has paid out a record £450,000 for an end-of-terrace house in one of the Victorian streets being bulldozed across northern England to make way for modern housing developments.

A Cheshire-based property investor picked up the payout, which is more than double the price that any other property has fetched on the same road in the last two years. Property experts said it could be completely refurbished for less than £100,000.

The purchase price is the most blatant example yet of how a £1.2 billion government housing regeneration scheme has been undermined by rising house prices and property speculation.

“It’s the most ridiculous amount of money to spend on a house so that you can knock it down,” said Karen Abbad, who belongs to a local residents’ association near the condemned Manchester property. “They should be investing the money in renovating these homes.”

The scandal of the huge payouts for houses due for demolition has emerged after a freedom of information request by The Sunday Times. The prices now being paid mean Gordon Brown will have to scale back the demolition plans for rundown Victorian and Edwardian homes or find billions of pounds out of public funds to buy them.

Under the government’s so-called Pathfinder scheme - championed by former deputy prime minister John Prescott - it was proposed up to 200,000 Victorian homes in the Midlands and northern England would be bulldozed and replaced with modern housing developments.

When the Pathfinder projects were first conceived, terraced homes could be bought in the north of England for as little as £12,000, but Yvette Cooper, the housing minister, has been caught out by rising property prices.

It was confirmed this weekend the most expensive Victorian house bought to date for demolition is 1455 Ashton Old Road in east Manchester. A Cheshire-based investor sold the house to Manchester city council last year for £450,000 under the Pathfinder project, funded by the Department for Communities and Local Government.

Residents claimed the price was about £100,000 above market value, but council officials insist they paid a fair price based on the local property market.

Steve Clapperton, a local landlord, said: “I would not buy houses for that much and then demolish them. It’s a waste of taxpayers’ money.” He said a property like 1455 Ashton Old Road could be refurbished for £75,000 and brought to modern standards with all necessary fire and health protection in place.

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