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House prices leap but the divide grows too

House prices posted their largest monthly increase for three years in March, led by the biggest hike in London since February 2010.

But the news, revealed today in the latest Hometrack housing survey, will not generate much cheer among homeowners waiting for a decent recovery in the value of their property. The underlying news from the survey is to confirm the growing divide between the London property market and the rest of England and Wales: national prices climbed just 0.3 per cent while in the capital they rose 0.7 per cent.

Richard Donnell, director of research at Hometrack, put a positive spin on the figures. "A general improvement in market conditions was reflected across the country with prices falling in just one region, the North East," he reported.

There has been low growth in the number of new homes coming to market, while March marks a seasonally strong time of the year when there is rising demand. "A lack of housing for sale underpins the boost to prices," added Mr Donnell.

The length of time a house spends on the market has seen a clear shift downwards over the last two months, particularly in Southern England where market conditions have been strongest. In London, a house is up for sale for an average of 4.9 weeks before it is sold, the shortest time since October 2007.

Mr Donnell anticipated that wealthy overseas buyers will be looking even closer into buying homes in London over the coming months.

"The weakening pound and concerns over Cyprus and the eurozone will only serve to further boost the flow of international funds into the capital," he said.

High stamp duty costs are likely to result in would-be buyers looking to more affordable outer areas of London.