House prices up 0.1 per cent in March

House prices in March were marginally (0.1%) higher than at the end of 2010, according to the Halifax House Price Index. The average UK house price stood at £162,912 in March.

Prices in March were 2.9% lower than a year ago as measured by the average for the three months to March against the same period a year earlier. This is the biggest annual decline since October 2009.

House sales show signs of stabilising but at a low level. The number of mortgages approved to finance house purchase - a leading indicator of completed house sales - recovered further from its December low with a 2% increase between January and February on a seasonally adjusted basis, according to Bank of England industry-wide figures. Approvals were virtually unchanged compared with February 2010, at 47,000, but were 60% lower than four years earlier (116,700 in February 2007).

The Budget contained a number of announcements relating directly to the residential property market. Successful implementation of some of these measures should increase the supply of new homes and boost the number of properties for rent, helping to reduce the size of swings in house price movements over the cycle.

The introduction of a new shared equity scheme, known as FirstBuy, will help some first-time buyers to enter the market through the purchase of a newly-built property. The buyer will put down 5% of the purchase price with a further 20% provided by the government and the housebuilder in the form of a low interest loan. The impact, however, will be limited as it aims to assist 10,000 households - equivalent to 5% of all first-time buyers in 2010.

Just 1.1% of residential property sales will be affected by this month's increase in the stamp duty rate from 4% to 5% for homes worth over £1 million. Unsurprisingly, London has the highest proportion of million pound home buyers (4.7%). The increase will add £10,000 to the total stamp duty bill for someone paying £1 million for a home.

Some signs of improvement in the labour market. The number of people in employment increased by 32,000 in the three months to January compared with the previous three months, according to the latest figures from the ONS. This rise was entirely due to an increase in the number in full-time employment (75,000) whilst part-time employment fell by 43,000. Total employment has risen by 296,000 over the past year with a 90,000 increase in full-time employment.

Commenting, Martin Ellis, housing economist, said: "House prices continue to fall at a modest pace as measured by the quarterly rate of change, the best measure of the underlying trend in price movements.  Prices in the first quarter of 2011 were 0.6% lower than in the fourth quarter of 2010.  There was a 0.1% rise in prices in March and prices were a similar amount above those at the end of 2010.

"The overall decrease in prices in the first quarter of 2011 compared with the previous quarter was a little lower than the quarterly falls recorded in the third and fourth quarters of 2010.  The recent increase in employment, particularly those in full-time jobs, may have been an important factor supporting the market.

"Our forecast remains for a 2% decrease in house prices in 2011 as a whole. Uncertainty over the general economic outlook and individual financial circumstances are likely to constrain housing demand, resulting in some modest downward pressure on prices."