UK House Prices Rise at Fastest Pace in 3 Years

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British house prices rose at their fastest pace in nearly three years in May, a survey showed on Tuesday, as policies aimed at kick-starting the market attracted new buyers.

The Royal Institution of Chartered Surveyors said that its seasonally adjusted house price balance for May came in at 5, meaning that slightly more of its members reported price rises rather than price falls in the preceding three months.

That was the strongest reading since June 2010, which also recorded 5, and beat the forecast for 4 in a Reuters poll. In April the balance stood at 1.

The balance has been in largely negative territory for the last three years,as the government's tough austerity measures, muted wage growth and difficult lending conditions have weighed on the housing market, with house prices still almost a fifth below their 2007 peak.

But new buyer enquiries were reaching 2009 levels last month, RICS said, as measures such as the Bank of England's Funding for Lending Scheme and the government's Help to Buy policy, aimed at loosening credit conditions, began to flow through the market.

RICS said its members sold 17.9 homes on average in the three months ending in May. While still low compared with the 2007 peak, it was the highest reading since January 2010.

The RICS survey chimes with house price data from mortgage lender Halifax,as well as wider economic surveys that suggest recovery is gathering pace.

"More people decided to get out there and view property, and more transactions went through than in quite some time," said Peter Bolton King, RICS global residential director, adding that the housing market was stabilising across the country, not just in the more affluent south-east.

"There is still a very long way to go until we see a full-scale recovery but green shoots are beginning to sprout."

The Funding for Lending scheme, launched last year, offers banks and building societies cheap finance to encourage them to lend more to households and businesses and has led to more affordable new mortgages.

The government's Help to Buy scheme commits funds to shared equity loans for new-build homes and from 2014 will guarantee mortgages, allowing buyers to purchase without large deposits.