Shortage pushes up house prices

HOUSE PRICES showed strong signs of recovery in the three months to the end of February, fuelled by a shortage of properties on the market, according to a survey by the Royal Institution of Chartered Surveyors (RICS), writes Andrew Verity.

The survey showed 34 per cent of chartered surveyor-estate agents reported a rise in prices in their area, while only 7 per cent reported a fall. The figures are more optimistic than at any time since last summer.

Confidence is strongest in London, where a balance of 45 per cent of surveyors reported price increases. As recently as December, the balance was 30 per cent reporting falling prices.

Spring is traditionally the strongest season for the housing market. But the institute said prospects for the market were brighter even after this was taken into account.

RICS said the renewed optimism is yet to reach regions such as the Midlands and the North, where manufacturing redundancies are knocking buyers' confidence.

Gordon Brown's decision to abolish mortgage interest relief next year will bite harder outside London because it applies only to the first pounds 30,000 of a mortgage. The tax relief represents a larger chunk of the average mortgage outside London, where property values are lower.

But in London, an extra 0.5 per cent stamp duty on prices over pounds 250,000 would take its toll. The stamp duty payable on a pounds 250,000 house has now risen from pounds 2,500 to pounds 6,250 in two years. Ian Perry, housing market spokesman for RICS, said: "It may have some dampening effect at the top end of the housing market, particularly in London and South-east England.