House prices rise in September

 

House prices rose for a fifth month running in September to leave them flat year-on-year, the Nationwide Building Society said on Friday, in a further sign that the housing market is stabilising.

The mortgage lender said house prices rose 0.9 percent last month, slightly better than economists' forecasts of a 0.7 percent increase after August's 1.4 percent rise - a downward revision from the initial 1.6 percent estimate.

September's gain left prices unchanged on the year - the first time since March 2008 that prices have not declined on a year-on-year basis.

However, economists cautioned that the pace of increases was slowing and the support for the housing market was largely coming from a lack of supply of new properties and the greater affordability of those properties that are on the market.

"While it looks ever more likely that February marked the trough in house prices on the Nationwide measure, we suspect that they will be prone to relapses over the coming months and we very much doubt that a sharp, sustainably upward trend in house prices is in the process of developing" said Howard Archer at IHS Global Insight.

"It continues to be very difficult for many people to get mortgages - particularly first-time buyers - and this situation seems likely to improve only gradually" he added.

The average price of a home is now 161,816 pounds.

"The further increase in house prices is very much consistent with improvements in a broad range of economic and financial indicators over the last few months" said Nationwide chief economist Martin Gahbauer. 

House prices have been supported in recent months by a lack of homes coming onto the market, alongside a tentative pick-up in interest from buyers.

Gahbauer said that high unemployment and restrictive credit conditions meant it was unlikely house prices would continue to increase at the strong rate seen in recent months.

"One reason to remain cautious about the outlook for house prices it that turnover in the market is still well below normal levels," he said. "At the current rate of increase it would take another 18 months for it to reach pre-downturn levels."

If the recent trend in firmer prices does, over time, lead to more properties being put on the market, that in itself would be likely to hold prices down further, economists argue, with supply more rapidly outpacing demand.

"Consequently, despite further likely gains in the very near term, we suspect that house prices will be prone to relapses and will be essentially flat overall between now and the end of 2010" said Archer.