House prices rise for seventh month

House prices rose for the seventh month in a row during November but there are further signs that the pace of the recovery is beginning to ease, figures showed today.

The cost of a home increased by 0.5 per cent during the month, pushing average property prices up to £162,764 - a level last seen in August 2008, according to Nationwide.

Martin Gahbauer, Nationwide's chief economist, said: "The monthly rate of house price inflation was unchanged in November at a seasonally adjusted 0.5 per cent, leaving the average price of a typical property 2.7 per cent higher than a year earlier."

But there are signs that the recent pace of the recovery may be moderating, with the 0.5 per cent rise recorded for both October and November, the smallest since prices stopped falling in April.

The three month on three month growth rate, which is generally considered to be a smoother indicator of the underlying trend, also moderated during November to 2.8 per cent, down from 3.5 per cent in October and 3.8 per cent in September.

Today's figures come the day after the Bank of England reported that the number of loans approved for house purchase had increased for the 11th consecutive month in October, rising to 57,345, their highest level since March 2008.

The housing market has recovered quicker than expected during 2009 as a shortage of properties on the market has pushed up prices.

However, many economists are predicting a return to price falls during 2010 as more homes are put up for sale.

Nationwide said the housing market remained "crucially dependent" on labour market conditions.

It added that while unemployment had increased noticeably, the rise had not been as rapid or as pronounced as previously feared.

Mr Gahbauer said: "Despite continued uncertainties about the future, the better than expected performance of the labour market has probably contributed to the surprise rebound in house prices this year.

"Together with the fact that mortgage rates have fallen sharply as a result of base rate cuts, this has meant that far fewer borrowers have fallen into arrears than would normally be the case in such a deep recession.

"As such, the downward pressure on house prices from distressed sales has so far been significantly lower than expected."

Howard Archer, chief UK and European economist at IHS Global Insight, said: "While the Nationwide data indicate that house prices are still on an upward track from their February low, the reduced month-on-month increases in both November and October suggests that the rally is beginning to get heavy legged.

"This fuels our suspicion that house prices are likely to suffer a modest relapse in 2010."

Ed Stansfield, property economist at Capital Economics, said: "November brought further evidence that the upswing in the housing market may be running out of steam.

"Although the timing of any switch remains very difficult to call, our central view remains that the recent gains in average house prices will not be sustained and that house prices will drop back, by perhaps 10%, during 2010."

But the Royal Institution of Chartered Surveyors was more upbeat.

A spokesman said: "A key driver of the rebound in prices has been the lack of new instructions coming on to the market.

"However, there are now a few signs that this is changing, with the latest RICS housing market (survey) showing a little more property being registered with estate agents.

"Nevertheless, the imbalance between buyer interest and the available stock of property is still sufficiently large to point to further price increases into the new year."