UK house prices dropped slightly from February to March as demand weakened, according to a study by research firm Acadametrics Ltd. and residential property service company LSL Property Services Plc.

Lloyds Banking Group Plc believes that economic uncertainty is going to continue to constrain housing demand, and predicts another 2% drop in housing prrices for 2011.

London is one of the exceptions to this; house prices in the capital rose 3.7% in the last three months compared to the same period in 2010. The larger price drops are more evident in northern England and Wales.

In March, the average price for a home in England and Wales dropped to £222,146, a 0.1% decline from February. The value was unchanged from a year earlier.

Constrained bank lending and a housing undersupply kept the prices steady, with the Bank of England holding its benchmark interest rate at a mere 0.5%.

The number of transactions rose 30% in March from February and 6% from a year earlier, as many buyers made early purchases of homes valued at £1 million or more to avoid a scheduled increase in stamp duty.

The number of mortgage approvals rose by 4.3% in March -- at 48,979, the most since May 2010, but still abut half the average level recorded over the last decade.

Source: Bloomberg