The prospect of confidence returning to the housing market is being damaged by Government-caused confusion over the future of stamp duty, chartered surveyors have warned.

Figures indicated marginally better conditions last month despite estate agents selling an average of just 14.4 properties each during the three months to July, the lowest number of property sales since records began in 1978, the Royal Institution of Chartered Surveyors (Rics) said.

Rics added that sellers appeared to have "more realistic" sales expectations, while fewer agents reported price falls and more buyer inquiries for the third month running.

But these improvements were in danger from continued speculation of whether ministers might temporarily suspend stamp duty in a bid to revive the housing market, the institution said.

The possibility of such a move emerged last week, with both the Chancellor Alistair Darling and housing minister Caroline Flint refusing to confirm or deny the speculation. It prompted warnings from estate agents that some buying had stopped while a definite decision was made.

Rics spokesman Ian Perry said: "The lack of mortgage finance has brought the housing market to a virtual standstill with first-time buyers rapidly becoming an endangered species.

"Going forward, there are signs that sales activity might pick up a little as sellers start to re-evaluate unrealistic asking prices.

"However, the current confused messages from the Government regarding stamp duty risks damaging any returning confidence and may discourage mobility."

Rics said 83.9% more surveyors thought house prices fell during July compared with those who saw a rise, an improvement from the 86.9% more who saw falls in June, the trade body said. It is also further progress from the 92.9% reporting falls in May.

In a further sign of slightly better market conditions last month, Rics said demand improved with 27% more surveyors reporting a fall in the number of people looking to buy a new home than those who saw a rise. This compared to 35% reporting falls in June and 50% in May.

New instructions to sell property also edged closer to positive territory with 3% more surveyors reporting a fall than a rise, up from 13% in June.

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