(Updates with annual price decline in second paragraph and comment from Halifax in fourth.)
Feb. 6 (Bloomberg) -- U.K. house prices rose for the first time in three months in January, according to Halifax, which said the outlook for the property market will depend on developments in the euro area.
Prices increased O.6 percent from December to an average 160,907 pounds ($253,783), the mortgage unit of Lloyds Banking Group Plc said in a statement in London today. From a year earlier, values were 1.7 percent lower.
While property prices have benefited from a shortage of homes for sale and record-low interest rates, risks to the economy from the sovereign debt crisis in Europe are weighing on the outlook. The Bank of England will probably increase its bond-purchase program by 50 billion pounds this week, according to economists in a Bloomberg News survey.
“Prospects for house prices over the coming months will, to a large extent, depend on events in the euro zone and the repercussions of developments there for the U.K.,” Halifax economist Martin Ellis said in the statement. “If the U.K. can avoid a prolonged recession, we expect broad stability in house prices in 2012.”
In the three months through January, values were 0.9 percent lower compared with the previous quarter, Halifax said. From a year earlier, prices in the three-month period were down 1.8 percent.
Surveys last week pointed to strength in the U.K. economy, with indexes of service and manufacturing output showing expansion in January. Consumer confidence rose to the highest since June last month as inflation slowed to 4.2 percent, GfK NOP Ltd. said.
Still, the National Institute for Economic and Social Research said Feb. 3 the economy may shrink 0.2 percent in the first three months of 2012 after contracting in the fourth quarter. Policy maker Adam Posen said a day earlier “there’s a case” for the Bank of England to increase its bond-purchase target by 75 billion pounds.
The Bank of England will probably raise its bond-purchase plan by 50 billion pounds, according to 34 of 50 economists in a Bloomberg News survey. Fifteen forecast a 75 billion-pound increase and one predicted no change. The central bank will also keep its benchmark interest rate at a record low of 0.5 percent, according to all 56 economists in a separate poll. The bank will announce the decision at noon on Feb. 9.
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