Autumn Property Survey: Only the uncertainty is for certain: The experts cannot agree if prices are going up or down and buyers remain nervous. David Lawson reviews a difficult market

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Housebuilders had a pleasant surprise this month. The government says they can now put up flagpoles outside their schemes without asking permission.

'I wonder if that applies to gallows as well,' muttered one ungrateful chief executive waiting next in line to greet a minister on a site visit. 'Then we could string them all up.'

How things have changed. A brigade of dentists must have been worn out polishing the smiles of chairmen ready to beam out the message of soaring profits as housebuyers swarmed back this year. Then came the shock of a half-percentage point interest rate increase.

Only a small rise, said Eva Lomas, president of the National Association of Estate Agents (NAEA). Hardly noticeable on most monthly mortgage bills. But just enough to wipe away those smiles.

Roger Humber of the Housebuilders Federation is still incandescent, blaming a 'team of quack economic advisers' who had created the runaway 1980s boom and got every decision wrong since about joining, and then leaving, the ERM.

'The only good news is that their time is running out,' he wrote in the federation's journal. And this from an industry that is supposed to be the bedrock of government support.

Most estate agents feel just as let down. Six out of 10 believe this has killed hopes of recovery this year, according to polls by both leading representative bodies, the NAEA and the Royal Institution of Chartered Surveyors (RICS).

A string of top builders are also wondering if their dentists' work was wasted. News of soaring profits was tempered with reports that buyers melted away after the rate increase. Meanwhile, ordinary owners are left wondering just what will happen next.

That is not unusual. The last year has been dogged with contradictory messages from above. And there is no simple answer. House values no longer move in unison across wide areas of the country, despite what the surveys say. Nor do they follow old rules.

Take Greater London, where the contradictory messages of the Halifax and Nationwide building societies were, for once, almost in harmony. Both say average prices rose about 2 per cent in the 12 months to September.

Yet the agents Barnard Marcus cited increases of close to 10 per cent for family homes around the western sections during the summer. Closer to the centre, figures look even more absurd, with agents registering 20 per cent annual rises. Savills estimates 4 per cent in the three months to September alone.

Normal service will resume in the spring, says Simon Agace of Winkworth. He predicts 10 to 15 per cent increases next year. This is partly because London is a special case, rich in buyers insulated against interest rate increases and job fears. Floods of overseas investors and City of London bonuses have also driven the market upwards.

But what about the real world? Mr Agace says it takes more than one small interest rise to choke off a market. That requires a general economic slide.

Yet one round of tax increases and reduced mortgage relief last April made most potential buyers wary - despite government assurances that they would have little impact. Another round is on the way. And interest rates may rise yet again if ministers spot the slightest hint of inflation.

'There is a crisis of confidence,' says John Hubbard, chairman of Cluttons Residential. 'People want to feel better off. They just can't convince themselves.'

Yolande Barnes of Savills is convinced that London's gain will spill out to benefit the rest of the country, just as it always has in the past. Incomes are rising; demand is rising from buyers who have postponed moving; population pressures are rising. The only thing not increasing is the supply of good housing.

Simple supply and demand means prices will increase. It will vary from region to region - and even street to street - depending on local demand and quality of housing. But the fact that homes are cheaper in real terms than at any time since 1970 means that buyers will eventually move in to restore the balance.

The economic runes read differently to some experts, however. Income levels are less important than government policies, says Geoff Meen of Reading University. The crucial factor is uncertainty among ordinary buyers.

In other words, we can be better off but not feel better. This has always been the case, he says in a Joseph Rowntree Foundation study. Analysts were -and remain - wrong to concentrate on the ratio of house prices to incomes.

In any case, people are not as well off as it appears, according to other Rowntree studies. Steve Wilcox of Cardiff University found that the mortgage-to-income ratio has fallen from 12.5 per cent in 1990 to just over 10 per cent last year, but this is still above the Eighties average.

First-time buyers are paying a higher percentage of their earnings than in 1984.

Negative equity is also more deeply rooted than many believe. The School for Advanced Urban Studies looked outside the usual markets studied in London and found that a quarter of homes in Bristol and Luton were worth at least pounds 10,000 less than the mortgage.

None of this rules out a new boom , says Mr Meen - providing uncertainty is dispelled. If people feel confident enough to buy, values will rise. That would cut negative equity and release others to move, rippling through the market as Savills expect.

Nor does it prevent hotspots of activity in central London and some other towns and cities. Take one of the old favourites of the boom, London's Docklands. Margaret Allen of New London Estates sold five properties in September within the tight area of Shad Thames, south of Tower Bridge. Her former office in Grantham, Lincolnshire, struggled to achieve nine in the whole town.

Demand is insatiable for plush flats in this area close to the City, yet prices are barely creeping upwards. Across the river, meanwhile, Galliford Homes launched some cheap, small flats and practically sold out in a weekend.

The same can be seen in towns right across the country. Keen prices bring sales; but buyers uncertain about the future will turn their noses up at anything that means spending too much.

'Houses continue to sell where correctly priced,' says Peter Miller of the RICS. 'Realistic' prices are in desperately short supply, however. Many owners have no choice because of negative equity. Others must learn to adjust.

Tom Marshall of Cluttons Residential also works in the hothouse of central London and sees a silver lining to the cloud of interest rate gloom. Either rates will rise again and force people to cut prices and sell, or values will react to buying pressure and jump 10 per cent next year, he says.

It is no comfort to ordinary owners when professionals offer such different futures with equal conviction. But uncertainty appears to be the one thing that everyone can be certain about nowadays.

(Photograph omitted)