First-time buyers are relieved that Gordon Brown has scrapped plans to allow residential property to be included as part of self-invested personal pensions (SIPPs), according to Yorkshire Bank's latest Housebuyers report.

In his pre-Budget statement in early December, the Chancellor U-turned on the Government’s earlier decision to allow residential property to be included in SIPPs.

Before this, one in four (24%) first-time buyers said they would try to buy before April 2006 - when the reforms were due to take place - as they feared competition with buy-to-let investors would drive house prices beyond their reach, according to the report.

A further one in three (35%) anticipated a greater struggle to buy after April as such pension investors would be targeting similar types of property.

Gary Lumby, Yorkshire Bank’s Head of Retail said; "First-time buyers can now take a little more time in finding a house to suit their budget due to the changes to SIPPs.  They no longer have to rush to buy before April for fear of greater competition and higher prices.

"However, first-time buyers should look to buy sooner rather than later.  The longer they wait the harder it will be to buy as prices are rising, so it's unlikely to get any easier."

The Governments' changes to SIPPs have not left too many potential investors disappointed.  Just one in 10 (11%) were considering buying a second property as part of their pension.  A further one in five (20%) admitted they didn’t even know about SIPPs in the first place.

Positive mood

Nonetheless, first-time buyers are still more likely to be looking to buy.  One in six (16%) said market uncertainty had put them off buying in 2005 but are now looking to buy this year.

Indeed, Yorkshire Bank's latest Housebuyers report found confidence in house prices is at an 18-month high.  More than half of those surveyed (55%) expect to see rising prices in 2006 - a nine per cent increases on last January.  This is also the highest figure since June 2004, when 66 per cent were predicting an increase in prices.

Gary Lumby said: "Buyers are starting 2006 in a more positive mood than last year, when there seemed to be a lot more uncertainty regarding where the housing market was going.

"The market has been showing some encouraging signs of growth in the last few months.  House prices have been rising - albeit modestly - and the number of mortgage approvals is up.  In fact, the Council of Mortgage Lenders recently reported record December lending figures.  This more positive outlook is being supported by expectations of a further cut in interest rates in the next few months."

"Nonetheless, we share the view that future increases will look modest compared to what we have seen in the last few years."

But fear over council tax rises

One factor deterring first-time buyers is the prospect of higher council tax.  Yorkshire Bank found almost one in four (23%) first-timebuyers are putting off plans to buy until local councils announce their charges for the year ahead.

Gary Lumby added: "Rising house prices are stretching first-time buyers' already tight budgets and so the prospect of higher council tax is understandably a cause of concern.  Many it seems are not prepared to buy at the moment as they fear buying in an area that may be subject to higher council tax charges from April."

Regional variations

The latest Housebuyers report found differing opinions across the country towards the housing market for 2006:

• West Midlanders are the UK's most confident with 58 per cent expecting house price rises
• In neighbouring East Midlands, one in 10 (10%) think prices will fall - making them the country's least confident
• Buyers in the South West think they face the stiffest competition with more than one in four (27%) willing to offer the asking price straight away.