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House prices rise again

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Tuesday Jun 30 2009

House prices rose for the third time in four months during June as the market was boosted by a shortage of properties being put up for sale, figures showed today.

The average value of a UK home rose by 0.9% during the month to stand at £156,442, according to Nationwide.

The annual rate at which house prices are declining also fell for the fourth month in a row, dropping to 9.3% - the first time for a year that the measure has been in single digits.

But despite property prices now being only 0.2% lower than they were at the beginning of the year, the group warned that the recent improvement was unlikely to mark the beginning of a sustained recovery.

It said that while the rises seen since March were likely to be more than just "statistical noise", they were taking place against a backdrop of very low activity.

The number of mortgages being approved for house purchase is still 55% below its long-term average despite recent rises, and at a level which is usually associated with falling prices.

Martin Gahbauer, Nationwide's chief economist, said: "While it is encouraging to see that prices are no longer seeing steep falls, there are still many obstacles in the way of a genuine and sustainable price recovery.

"To begin with, abnormally low supply levels are unlikely to last forever, as the recent price increases should make previously hesitant sellers feel more confident about marketing their properties."

He added that more properties were also likely to come on to the market as the economic downturn took its toll on homeowners.

There has been a run of positive data on the housing market in recent weeks as potential buyers have been tempted back by record low interest rates and recent house prices falls.

But figures released by the Bank of England yesterday showed that the number of mortgages approved for house purchase had levelled out at around 43,000 during May.

Economists said the figure, which was below their expectations, highlighted the current fragile state of the housing market.

They warned that house prices still had further to fall due to rising unemployment and the ongoing problems in the mortgage market.

Nationwide said all regions of the UK saw a moderation in the annual rate at which house prices are falling during the second quarter.

The slide in house prices still remains steepest in Northern Ireland, where the average home costs 26% less than it did during the second quarter of 2008, while falls have been lowest in Wales at 6.2%.

The group said there had been significant improvements in house prices in London, the South East, East Anglia and Wales during the three months, with all of these regions posting quarterly gains.

Wales led the way with a quarterly rise of 7.7%, followed by East Anglia at 5.2% and London at 4.8%.

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