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UK house prices up just 0.3%

House prices in the UK edged up 0.3% in February as the property market continued to "tread water", Nationwide has said.

The increase, which was only the second gain recorded since May last year, left the average home costing £161,183.

But the group saw little reason to be optimistic, saying it expected the housing market to be "sluggish" during 2011.

Annual house price inflation remained in negative territory, with prices 0.1% lower than in February last year, although this was a slight improvement on the fall of 1.4% seen in the year to the end of January.

According to the University of Ulster's house price survey, Northern Ireland's house prices fell 7.7% in 2010, bringing the average house price down to £149,795.

There was some stabilising in the final quarter of the year when there was a weighted increase of 0.1%.

Nationwide said UK prices were also broadly flat, according to the three-month-on-three-month change, which is generally seen as a smoother indicator of market trends.

Robert Gardner, Nationwide's chief economist, said: "This shouldn't come as too much of a surprise. Housing market trends are closely linked to wider economic prospects.

"Given that the recovery hit a soft patch at the turn of the year and looks set to remain sluggish in the year ahead, the property market is likely to follow suit, with relatively low transaction levels and prices moving sideways or modestly lower through 2011."

But on the plus side, it said there were few signs of a glut of unsold homes building up on the market.

Instead, it said there were tentative signs that the volume of properties being put up for sale was slowing down, which could offer some support to prices.

Nationwide said with the economic recovery set to remain fairly modest, any improvement in employment and wages was likely to be slow going, leading to a subdued housing market during 2011.

Over the longer term, Nationwide expects wages to outpace house price growth, gradually improving affordability.

But it warned that if the rate at which new homes were being built did not improve, an increase in demand would renew the upward pressure on prices.