Estate agents have accused the Government of undermining the property market by increasing the rate of stamp duty on commercial property.

The annual survey by the Irish Auctioneers and Valuers Institute (IAVI) showed 2002 was a difficult year for commercial property outside the retail sector. And chief executive Mr Alan Cooke said the Budget decision to stamp commercial property acquisitions over €150,000 at 9 per cent would only exacerbate that.

The report states: "Over €1 billion went into commercial property in England last year and much more will follow after Budget 2003 stamp duty increases."

"We believe that if stamp duty were dramatically reduced, the Exchequer would benefit as more commercial property money would stay within this market and, on the residential side, people would be more likely to move homes rather than simply extending," said Mr Cooke.

"It would be the same as the situation with capital gains tax \ revenue following the halving of the CGT rate by Mr McCreevy in 1997."

The IAVI report confirmed the 2002 rebound in residential property prices after a fall in 2001. Prices overall rose 10-14 per cent, with smaller urban properties attracting the highest demand. The rate of increase was spread fairly evenly throughout the State.

While the return of investors to the market and the reintroduction of mortgage interest relief on investment property were cited as factors behind the rise, Mr Cooke said the major influence was the continuing low interest rate environment. The report notes that banks advanced more than €10 billion in mortgages, a rise of a third on the 2001 figure.

The average price of a new home now exceeds €200,000. Among second-hand property, the average has risen to €250,000 across the State and above €310,000 in Dublin. For 2003, house prices are forecast to rise by a more modest 6 per cent.

Rents in the capital fell 5 per cent but rose elsewhere, giving a 3 per cent rise for the market as a whole. On the commercial side, the retail sector saw higher rents and falling yields, especially for properties in prime areas. But rents in the office sector slipped as vacancies outnumbered a strong take-up of new premises.

Estate agents predict further softening of rents in the office and industrial markets this year.