JAN 7, 2013 10:42am ET

U.K. Home Prices Rise as Halifax Sees Stagnating Market

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U.K. house prices rose for a second month in December and will probably remain little changed in 2013 as the uncertain economic outlook constrains property demand, according to Halifax.

Values advanced 1.3% from the previous month to an average 163,845 pounds ($262,900), the mortgage unit of Lloyds Banking Group Plc said in a statement in London today. The monthly price gain in November was revised to 1.6% from a previous estimate of 1%. From a year earlier, values rose 2.6% in December.

While the British economy emerged from a recession in the third quarter and the Bank of England is trying to boost the availability of credit, uncertainty about the recovery is curtailing property demand. Nationwide Building Society said last week that house prices may decline “modestly” in 2013.

“During 2012, house prices were broadly flat and we expect this subdued trend to continue,” said Blerina Uruci, an economist at Barclays Plc in London. “However, we forecast a gradual recovery to emerge toward the second half supported by improving economic conditions, loose monetary policy and restricted supply. We also expect the BOE’s Funding for Lending Scheme to provide some support to prices, albeit modest.”

Prices were 0.6% higher in the fourth quarter compared with the third, and were down 0.3% from a year earlier, according to today’s report.

The Bank of England said in a Jan. 3 report that lenders increased the availability of mortgages “significantly” in the fourth quarter and spreads on home loans declined as its FLS began to take effect. A separate report showed mortgage approvals rose to the highest in 10 months in November.

Halifax said today that housing activity has “picked up a little,” noting that sales in the three months through November were up 2% from the same period a year earlier.

“There was evidence of a firming in the housing market in the final few months of 2012,” said Martin Ellis, a Halifax economist. “We expect continuing broad stability in house prices nationally in 2013 with prices likely to end the year at levels close to where they begin.”

Britain’s economy is likely to return to growth this year, according to a Bloomberg News survey of economists last month. Still, services unexpectedly shrank for the first time in two years in December and a construction index fell to a six-month low, clouding the economic outlook.

U.K. businesses are more optimistic on the economic outlook this year as tensions related to the euro-region debt crisis ease, according to separate surveys of finance directors and manufacturing executives published today.

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