March 25 (Bloomberg) -- U.K. house prices rose the most in three years this month, led by a surge in London, as demand outstripped supply.
Average values in England and Wales increased 0.3 percent, the biggest advance since March 2010, property researcher Hometrack Ltd. said in an e-mailed statement today. In London, prices jumped 0.7 percent, the most since February 2010.
The Bank of England’s Funding for Lending program has helped ease credit conditions, while plans announced by the government last week to assist prospective homebuyers will also support the market, Hometrack said. It also said the weaker pound and turmoil in the euro area will continue to lure purchasers from abroad.
“Lower mortgage rates as a result of the FLS have supported increased activity,” said Richard Donnell, director of research at Hometrack. “The weakening pound and concerns over Cyprus and the euro zone will only serve to further boost the flow of international funds into the capital.”
The pound has fallen 5 percent against the euro since the end of 2012 and is the second worst performer after the yen this year, based on Bloomberg Correlation-Weighted Indices. Rightmove Plc said London home sellers raised asking prices by 1.9 percent this month as the weakness of sterling fueled interest from overseas buyers.
Seven of 10 regions assessed by Hometrack showed price increases in March compared with the previous month. Two showed no change and one, the northeast, recorded a 0.1 percent drop.
While the stock of homes available for sale has risen 3.5 percent over the past six months, and 13 percent in the last two, demand in the past two months has surged 19 percent, according to today’s report. The Royal Institution of Chartered Surveyors said earlier this month that its gauges on the outlook for the property market improved in February.
Chancellor of the Exchequer George Osborne announced two programs on March 20 to help Britons buy homes as the recovery of the broader property market struggles to gain traction. The government will extend a program to help with purchase of new-build homes from next month, and starting next year will offer mortgage guarantees to help those with smaller deposits.
Minutes of the BOE’s March policy decision published the same day showed officials saw a picture of “broadly flat” bank lending from the FLS since it started in August. Still, the BOE added that the outlook “appeared more promising” and the housing market “had continued to show some signs of thawing.”
“While scarcity of homes, support for lending and new housing will act as a support to pricing levels, the problems of affordability and deposit levels still remain serious impediments to a full-blown” recovery, Donnell said.
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