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14 March 2011

London & South East drive February house price rise

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by Gill Montia

London & South East drive February house price rise

February saw house prices rise by 0.3% in England and Wales (to an average £222,456) with prices bolstered by strong demand in London and the South-East.

According to the latest LSL/Acadametrics house price index, the value of the typical home fell 0.5% year-on-year, as the strong gains seen in the early part of 2010 dropped out of the figures.

February also saw signs of recovery in the mortgage market, as the proportion of mortgages requiring a minimum 25% deposit fell to a two-year low.

At the same time, lending remained constrained with banks and building societies harbouring concerns over employment prospects, particularly in areas with high levels of public sector workers, such as northern England and Wales.

While transaction volumes increased by 2.4% in February, compared with January (to 41,200), the figure represents only 61% of the long-term average.

However, Richard Sexton, business development director of e.surv (part of the LSL group) comments: “The fact that prices are rising shows there is plenty of pent-up demand in the market.”

He adds: “Currently, a large proportion of buyers are those able to muster sizeable deposits, but if the economic horizon clears and the barrier of tight lending criteria is lifted, we could see both demand and prices pick up relatively quickly.”

Last week, the Royal Institution of Chartered Surveyors reported strong regional variations in house prices across the UK.

London was the only region to record a positive reading for house prices in February; outside the Capital more RICS members saw prices fall, rather than rise, with the East of England, East Midlands and Wales experiencing particularly negative readings.

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