UK house prices were flat over the last month but are up by 0.8 per cent over the past year, according to the latest Nationwide house price index.
This is the first annual increase for 13 months and means the average UK home is now worth £164,630.
The rise was fuelled by increases in London where prices are now higher than the peak they reached in 2007.
Between January and March the average price of a property in the capital went up by 2.8 per cent, to £306,919.
However, Nationwide warned that the outlook for the housing market was “unusually uncertain.”
The report said that the Funding for Lending Scheme (FLS) and the strong employment data has supported the property market.
Robert Gardner, Nationwide's Chief Economist, said: “In recent months buyer demand has been supported by healthy rates of employment growth, as well as the Funding for Lending Scheme, which has helped to reduce mortgage costs and increase credit availability. At the same time housing supply has remained relatively constrained.”
Analysts believe the initiatives outlined in the budget could force up house prices. The Chancellor, George Osborne plans to offer interest-free loans and £130 billion of guarantees to new mortgages from 2014 through the "Help To Buy" scheme.
However, the Office for Budget Responsibility says that the policy could stoke a housing bubble because the demand being created for mortgages is not being backed up by increased supply of properties.
However, mortgage brokers believe the main issue affecting the UK property market is one of supply.
Ben Thompson, MD Legal & General Mortgage Club said: “The main issue for the housing market is not one of price. Instead the major concern is the availability of housing stock in the wider market and continuing to make the mortgage finance available to service that demand. We have seen the announcement of several stimulus measures in the shape of FLS and ‘Help to Buy’ and they seem set to provide a positive impact as the year progresses.”
Nationwide found wide variations in how local housing markets were performing. London was the best performing region with prices up by 4.6 per cent compared to the first quarter in 2012. This means prices in the capital are now higher than they were during the 2007 peak, at £306,919.
Wales came in second with annual house price growth of 2.5 per cent, up to an average of £132,971. Northern Ireland saw a big improvement with house prices falling by just 0.9 per cent in the first quarter of 2013, after a fall of 8.2 per cent in the final quarter of 2012. However, prices in Northern Ireland remain little more than 50 per cent of the level they were at before the credit crunch.
Scotland was the worst performing region, with prices dropping by 4.9 per cent in the last year to an average of £128,594.
The mixed picture continued in towns and cities across the UK. Prices were up by 15 per cent in Camden, London and in Cambridge, but were down by 10 per cent in Liverpool and Carlisle.
Mr Gardner warned that the outlook for the property market is uncertain because the impact of the new initiatives such as the ‘Help To Buy’ scheme that were announced in the budget is not yet clear.
Mr Gardner said: "However, the outlook for the housing market is unusually uncertain at present, in part because the prospects for the wider economy are unclear, but also as the impact of a number of policy initiatives is hard to gauge."
Jonathan Samuels, chief executive of Dragonfly Property Finance, warned sellers not to be overconfident and overestimate the value of their home.
He said: "With the Funding for Lending Scheme appearing to have had an impact, and Help to Buy on the horizon, there is a degree of expectation in the market.
"There is confidence and there is overconfidence. In many areas of the country we are tipping into the latter.”
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