Homebuyers will not pay stamp duty on property worth less than £175,000 bought before the end of this year, after the Chancellor announced an extension of the existing tax holiday.

The move was part of a package of measures designed to reinvigorate the housing market and the beleaguered building sector.

Alistair Darling also announced a further £80 million in funding towards a Government-backed shared equity scheme for aspiring homeowners and a £500 million injection for housebuilders to recommence work on stalled new build schemes. Many developers had given up work as their own source of funding - lending from banks - had dried up.

The extra cash is understood to be part of the £1 billion fund announced earlier this week to stimulate construction of more much-needed housing.

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However commentators argued that neither the stamp duty reprieve or the extra funding would go very far. The Chancellor ignored calls to scrap the "slab" stamp duty system and to increase the threshold to £250,000 that would have helped far more buyers. The Royal Institution of Chartered Surveyors said the holiday would only lead to gridlock at the bottom end of the market when the tax is reintroduced at the beginning of next year. Lenders said the move would disproportionately benefit homebuyers outside of London and the South East, where the majority of homes cost more than £175,000.

Fionnuala Earley, chief economist at Nationwide building society, said: "The announcement that the £175,000 stamp duty threshold is to remain in place until the end of the year will be welcome for those at the less expensive end of the housing market, but the level of the threshold will still predominantly benefit those in the North. House buyers purchasing property above £175,000 will still be faced with the full burden of stamp duty."

Almost 60 per cent of home sales between September 2008 and January 2009 did not attract stamp duty as a result of the Chancellor increasing the threshold for a limited time only in last year's Pre-Budget Report speech, equivalent to 45,500 buyers, contributing to a fall in Government revenue from the tax from £14 billion in 2007 to 2008 to £8.2 billion between 2008 and 2009.

The extra £500 million plug for partially finished projects will translate into the completion of around 2,600 average-sized homes - a drop in the ocean compared with the Government's target of 240,000 homes a year until 2016.

David Orr, National Housing Federation chief executive, said: "We now fear that because the Government has failed to back a comprehensive house-building programme the number of homes delivered this financial year will slump to an 88-year-low of 70,000, while the number of people on social housing waiting lists will simply soar to unparalleled levels."

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