Property: Back to the law of the jungle: A sure sign of the recovery is when a vendor attempts extortion, says Anne Spackman

Blackmail is an occupational hazard in the property market. Over the past few years it has been deployed to great effect by purchasers who suddenly declare, on the day contracts are to be exchanged, that they want a few thousand off the agreed price.

Now it is the turn of the sellers. In the knowledge that there are too few houses being chased by far too many buyers, the first vendor blackmailers have come out of the woodwork. In central London earlier this month, a seller demanded an extra pounds 25,000 from his buyer on the eve of exchange of contracts.

This is one of the more brutal, but significant, indicators of recovery in the market. Last month's tax increases, combined with the fall in mortgage tax relief from 25 to 20 per cent, appear to have had no impact on sales or prices.

One housing analyst, John Stewart, has calculated that the increases are cancelled out by falls in mortgage rates and growth in earnings. He reckons that a married couple, both on average earnings, with an 80 per cent mortgage, now pay 15 per cent of their income on their mortgage, the same level of affordability as 12 months ago. This compares with 37 per cent in 1990. Agents across the country confirm that buyers are far more influenced by the cost of borrowing than by changes in their pay packets.

London has been climbing out of recession for the past 18 months and, though one-room and small two-bedroom flats (the hotbeds of negative equity) are still falling in value in some parts, everyone knows house prices are on the up.

In the smartest parts of town, agents have seen rises of between 5 and 10 per cent in the first four months of this year, on top of rises of 11 per cent last year. Savills Research is standing by its prediction of a 25 per cent increase by the end of the year, and other agents do not rule out 20 per cent.

In areas such as Wandsworth, Putney, Ealing and Highgate, family houses have seen the biggest increases. It has become the norm for them to go under offer at the asking price within days of coming on to the market. The only way buyers can compete is by offering more.

Olivia Fennell of Barnard Marcus cited two recent cases in south- west London. In the first, a big family house in Barnes with a price of pounds 500,000 went to sealed bids and sold for pounds 560,000. In the second, a woman whose house had been on the market for two years at pounds 250,000 suddenly attracted five offers in two weeks, of which pounds 265,000 was the highest.

In most parts of the country, where the recovery has yet to be felt, prices have stabilised but business is patchy. 'It's up and down by the week,' said Edward Waterson of Carter Jonas in York. 'Vendors are being over-optimistic and buyers are still very choosy.'

However, the increases are starting to ripple out to the rest of London, and to prime areas of the Home Counties, as well as being seen in parts of the North. Gosforth in Newcastle-upon-Tyne is coming out of recession at the same pace as Oxford, Solihull and the south Manchester belt. The divide is not between North and South but between the best and the rest.

In Surrey and Middlesex, two- bedroom houses have seen big rises, as first-time buyers take advantage of cheap mortgages to leapfrog the flat market.

Mark Everett of Michael Everett in Epsom, has just had 82 viewers for a four-bedroom detached village house. He said: 'The most acute shortages are in the pounds 120,000- pounds 250,000 market, anything from a good three-bedroom semi to a good four-bedroom detached. At least half the houses we have sold in that bracket have gone in 48 hours. '

To the west, in the wealthy belt of Berkshire, Buckinghamshire, Oxfordshire and Gloucestershire, supply is no longer as short, but the market is still buoyant. Tim Barton of Dreweatt Neate in Newbury said: 'In the higher price range property has been generally going for above the guide price. Most of the demand is coming from London. People have sold well there or made money in the City. Anything cottagey with land attracts interest. I have just offered a pretty two-bedroom cottage near Lambourn for pounds 140,000. We're getting inquiries from the weekend market, which has just reappeared.'

The next area to see price rises may well be Alderley Edge, Manchester's answer to Guildford. Agents report prices creeping up at the pounds 75,000- pounds 90,000 mark, under pressure from first-time buyers. But although competition higher up the market is fierce, buyers are not willing to be pushed into paying a penny more than they have to.

It seems that even in deepest Knightsbridge buyers remember that prices can go down as well as up and, however hot the competition, they are not willing to pay silly money. Their reaction to vendor blackmail - so far - has been that of the buyer in central London faced with the price hike of pounds 25,000. He walked away.

Household of Pets: Hannah Starkey's photograph of a family home in Fife won the top award for an individual photograph in the 'People and Housing in Scotland' competition, organised and sponsored by Scottish Homes (the government-funded housing authority) and the Stills photography gallery, in Edinburgh. The brief was to capture the relationship between Scottish people and their housing

(Photograph omitted)