Residential property prices in the United Kingdom increased for the third straight month in April, supported mainly by the low levels of mortgage payments in relation to income.
The house price index rose 1.1 percent month-on-month in April, which was faster than the revised 0.4 percent gain recorded in March, a monthly survey by the Lloyds Banking Group's Halifax division showed Wednesday. It was the biggest monthly growth since November last year.
Economists had forecast prices to stay unchanged month-on-month, following March's originally reported 0.2 percent increase. The standardized price of a U.K. home rose to GBP 166,094 from GBP 164,289 in March, reaching the highest level in nearly three years.
"Taking an overall view, we believe that house prices are likely to achieve a modest gain of a couple of a few per cent over 2013, helped by moderately improved activity," Global Insight Chief U.K. and European Economist Howard Archer said.
"However, a decisive upward move in house prices seems unlikely given the still difficult and uncertain economic environment."
The U.K. real estate sector has been showing signs of improvement in recent months, with the government's Funding for Lending scheme having its effect on the market. It is widely expected that taking a cue from the impressive growth of the service sector and the overall improvement in overall economic activity, the Bank of England would keep its stimulus program on hold at tomorrow's meeting.
In the three months ended April, the house price index advanced 2 percent from the corresponding period a year earlier, faster than the 1.1 percent rise seen in March. The latest increase was the strongest since September 2010, when prices rose 2.6 percent.
Economists had forecast the rate of growth to quicken to 1.6 percent. It was the fourth consecutive rise in the annual measure.
Sequentially, prices gained 1.3 percent during the three-month period, after rising 1.2 percent in the preceding quarter, marking the fifth consecutive increase.
"Weak income growth and continuing below-trend economic growth are likely to remain significant constraints on housing demand during the remainder of 2013," Martin Ellis, housing economist at Halifax, said.
The number of mortgage approvals for house purchases increased by 3 percent between February and March, following two successive monthly falls. Approvals in the first three months were 1 percent lower than in the previous three months.
In contrast to the Halifax data, a survey by the Nationwide Building Society this month showed that house prices in the U.K. declined slightly in April after staying flat in the previous month. The mortgage lender expects activity levels to strengthen in the coming months supported by the government's revised credit scheme.
In April, mortgage firm Hometrak said properties in London were sold at the fastest pace in more than five years in April, while house price growth across the U.K. and the capital city remained at three-year high.
The British economy dodged a triple-dip recession in the first quarter with the gross domestic product expanding 0.3 percent sequentially, underpinned by an expansion in the service sector.
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