Tax break fails to cheer homes market

THE housing market has had a short-term surge ahead of the deadline to reimpose stamp duty at midnight tonight, but the Royal Institution of Chartered Surveyors paints a gloomy picture for the future.

Just over half the surveyors in the RICS monthly survey reported house prices lower than three months ago, and two-thirds in the South-east reported lower prices.

The rush to get property deals through before the midnight deadline has speeded up sales. But that is thought to have brought forward sales that would have happened anyway. A quiet period is expected to follow.

Birmingham Midshires Building Society said completions last week were four times the average for the year. Bernard Woollard, marketing manager, said the stamp duty holiday had not had the effect of stimulating confidence in the property market.

The survey points to particular regions which have had a burst of activity. These include Portsmouth, Bath, Saffron Walden, Northampton, Cambridge and Newbury.

'In parts of Yorkshire and Humberside a combination of realism by vendors and the stamp duty saving has persuaded some purchases to enter the market,' the RICS survey says. In the South-east the market is generally quiet, and in London many sellers are asking unrealistic prices, so potential buyers are happy to look around, but they are not buying.

John Waldron, of General Accident Property Services in Devon, said that activity had been hectic, with many purchasers aiming to exchange contracts and complete today. 'Inevitably it will all go quiet afterwards. We are getting three months' income in one month. I don't think it has attracted any new buyers, but those who were in the market have taken advantage of it.'

Laurie Norman, an RICS spokesman in London, said there was a danger that after the deadline for the reimposition of stamp duty had passed buyers would demand an extra 1 per cent cut in the price of properties they had agreed to buy.

'Confidence is all that is needed for someone to buy a house and know that it will not be cheaper in three months' time. With turnover at half the normal level for the past three years, there is a lot of pent-up demand to move house,' Mr Norman said.

Clifford Easterbrook, an auctioneer working in the Gloucestershire area, said the property market was reflecting the state of the economy and could not be expected to lead it out of trouble. 'Until people are more secure in their jobs, they will not want to take on larger mortgages.'

He is currently selling a repossessed development of three houses which needs finishing off by a builder, and is advertising the reserve price - pounds 130,000 - which he believes represents a bargain and might get potential buyers interested. Normally the reserve is not revealed to encourage higher bids.

Gary Marsh, economist at the Halifax Building Society, said house prices were stabilising. 'They are ceasing to fall in the South and are stopping from rising in the North.' He blamed high real interest rates - the level of interest rates after taking the level of inflation into account - for the continuing malaise in the property market. 'We feel the Government should be cutting rates.'

Margaret Schwarz, an Abbey National economist, said there was a psychological problem in realising a price which was lower than a previous value even if that did not involve taking an actual loss. 'It's the confidence factor. People are looking for reasons to be gloomy.'