With the first serious round of auctions due to take place next week, it will be interesting to see whether the fresh cuts in interest rates will push prices up further. With the main lenders offering mortgages of under 4 per cent, buyers may be encouraged to go even higher than they had originally planned. The shortage of good period homes in commutable locations is as acute as ever, ensuring that this sector of the market will continue to soar at the back end of the year.

It could be a different picture for landowners selling off development sites over the coming months, as the Government requirements on social housing begin to take effect. By all accounts, there is about to be a rush of sites coming on the market in the hope that the planning process will be completed before the new law takes effect, by Easter at the earliest. The big question is whether developers will buy at a 20 per cent discount to take account of the fact that they will have to sell on 20 per cent of the site to the local authority at agricultural prices. The word on the street is that landowners whose sites have been serviced, but who have not released them for development, could face a doubling of capital gains tax to 40 per cent or possibly 60 per cent in the next Budget. Either way, site values are likely to drop in the next 12 months.

The housebuilders are clearly hoping to reach a compromise with the Government on the social housing issue, because of fears that housebuyers may not be prepared to pay big prices for new homes adjoining local authority houses.