February saw monthly house prices increase by 0.3%, although annual prices have fallen by 0.5% as the strong gains of early 2010 drop out of the figures.
There were also signs of a recovery in mortgage lending as the proportion of low LTV product numbers hits a 2-year low
The number of transactions in February increased by 2.4% to 41,200 – but this is still only 61% of the long term average, according to the index.
Commenting, Richard Sexton, business development director at e.surv said: "After falls throughout the final quarter of 2010, prices have been bolstered by strong demand in London and the South-East. The best performance has been in the market for prime property in London and the south-east, but there are also encouraging signs from the mortgage industry which could bring about a more widespread and sizeable recovery.
“The proportion of mortgage products requiring more than a 25% deposit is at a 2-year low and many of these new products are for high LTVs. Nevertheless, product numbers alone can be misleading.
“Lending is still constraining demand as mortgage lenders are concerned about the possibility of rising unemployment as the public spending cuts continue. These concerns are particularly focused on areas with high levels of public sector employment, such as northern England and Wales.
“However, the fact that prices are rising shows there is plenty of pent-up demand in the market. Currently, a large proportion of buyers are those able to muster sizeable deposits, but if the economic horizon clears and the barrier of tight lending criteria is lifted, we could see both demand and prices pick up relatively quickly.
“As the big price gains seen at the beginning of 2010 have dropped out of the figures, annual growth has slipped into negative territory and until mortgage lending gathers pace we can expect further falls in the annual rate of growth in 2011.”
