View from City Road: Mortgage relief is not builders' only worry

Yesterday's building society lending figures confirmed what the building industry has been scared of saying for the past month - the recovery in the housing market, such as it is, has been losing steam. Trafalgar House blamed lower-than-expected housing sales over the past eight weeks for its profits warning earlier this week. Others say the upturn expected in September and October failed to materialise.

Builders hope the fragility of the market is due to nervousness ahead of the Budget rather than a deep- seated suspicion of housing as an investment - which, given its performance over the past five years, would be understandable. They pray Kenneth Clarke will heed the signals and do nothing to upset consumer confidence further.

The Royal Institution of Chartered Surveyors yesterday joined the crowd urging Mr Clarke to leave mortgage interest relief (Miras) alone. Others, thinking that a forlorn hope, are pressing for the least disruptive change. That would mean, for example, phasing it out over a long period - say five years - so the effect on pay packets will be negligible.

There would be horror if the Government chose the option of abolishing Miras for new house purchasers while leaving existing owners alone. The disincentive to move could freeze the market for another five years.

For investors, the problem is that builders' share prices are assuming a robust recovery. While they have faltered in the past month, they are still more than 40 per cent higher against the market than a year ago. That rating supposes no harm from the Budget.

But Miras could be the least of the builders' worries. Change has been so widely predicted that, sensibly done, it could have little impact. Large tax increases could be much more serious. So could cuts in social housing, which look increasingly likely. Local authority and housing association work has been keeping many firms afloat.

Most housebuilders also have interests in construction, where battered margins and low order books would be further reduced if Mr Clarke took an axe to infrastructure spending. The next month will be a nervous time for building investors.