House prices post first rise since 2007 in March

By Fiona Shaikh and Matt Falloon

LONDON (Reuters) - House prices rose in March for the first time since October 2007, a survey showed on Thursday, raising expectations the housing market downturn may be nearing an end.

The Nationwide Building Society said house prices rose 0.9 percent on the month in March after a 1.9 percent drop in February, and a separate survey by the Bank of England showed lenders were becoming more willing to extend credit.

The mortgage lender cautioned against jumping to conclusions about a housing market rebound. However, investors seized on the news as a sign that the Bank of England's aggressive interest rate cuts may be helping conditions to perk up.

The pound has gained more than a cent against the dollar this session and hit a 3-1/2 week high against the euro, although the gains were driven partly by hopes that world leaders at the G20 summit would agree to more economic stimulus.

The figures also boosted shares in construction firms, with homebuilders Barratt Developments and Persimmon gaining nearly 20 percent and 12 percent respectively.

Construction activity fell at a slower pace in March though the sector still shed jobs at a record rate, CIPS/Markit purchasing managers data showed on Thursday.

Economists warned that it was far too early to call an end to the sharp price falls that have affected Britain's housing market for well over a year, taking prices down by nearly 20 percent from their peak in late 2007.

"We would caution that we still have a long distance to travel before turnover in the housing market is close to average, and prices show genuine signs of stability," said Malcolm Barr, economist at JP Morgan.