Brighter outlook for owners as South-east house prices surge

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The Independent Online
HOMEOWNERS in London and the South-east were presented with the

rosiest picture of house prices for years in the latest quarterly figures from the Nationwide Building Society published in time for Easter - traditionally the start of the house-buying season, writes Vivien Goldsmith.

House prices in Greater London rose by 2.6 per cent in the first three months of the year. Prices rose in outer London by 0.2 per cent and in the rest of the South-east by 1.4 per cent.

This was the largest quarterly rise in Greater London since autumn 1988. In outer London there was a brief rise in 1991, but otherwise the picture has been bleak since the spring of 1989. In contrast, prices in the East Midlands dropped by 5.4 per cent and there were continuing falls in the North and North-west. John Wriglesworth, housing analyst at UBS, said the South-east was poised for a sharp upturn.

The region has suffered the sharpest falls in prices - down between 25 and 30 per cent from the peak in 1988. This has resulted in a concentration of home owners with negative equity - mortgage debt larger than the value of their property. They cannot move, diminishing the stock of properties for sale.

Mr Wriglesworth estimates that as many as 2 million families are tied down by negative equity, although other estimates put the figure at 1 million. The government initiative to get housing associations to buy stocks of homes under the mortgage rescue plans, and the spate of Business Expansion Schemes which have been buying up property to rent have also reduced the number of properties coming on to the market.

Statistics published by the Halifax Building Society showed a more even picture across Britain, with price falls still occurring in London and the South-east. Its housing economist, Gary Marsh, said: 'I do believe we will see more stable house prices in the second half of the year.'