House prices tick up but outlook stays depressed

House prices rose by 0.3 per cent last month, but are still lower than a year ago, the latest index from Nationwide revealed yesterday.

February’s £161,183 average house price is 0.1 per cent lower than in the same month of 2010, the building society said. And the less volatile three-monthly index shows consistent falls since last July wiping more than 5 per cent off prices.

Nationwide blamed the slowing|economic recovery for the falls, as well as consumer confidence that has been dented by looming government spending cuts. And the situation is unlikely to improve.

“The overall picture is still one of a market treading water,” Nationwide chief economist, Robert Gardner, said. He expected “relatively low transaction levels and prices moving sideways or modestly lower through 2011”.

Part of the problem is the low level of first-time buyers, put off by fears over the economic climate despite continuing low interest rates.

“The fact that first-time buyer numbers are well below the levels prevailing before the financial crisis casts a shadow over the outlook for the wider market,” Nationwide said yesterday.

The picture of a market showing at best anaemic growth was supported by separate data from the Bank of England. Mortgage|approvals rose slightly to 45,700 in January, from the 21-month low in December, but were considerably lower than the 70,000-plus experts deem necessary for stable prices, let alone the 90,000 monthly average since 1993.

The sombre mood was echoed yesterday by housebuilder Persimmon despite a rise in profits. It reported profits almost doubled to £154m last year, on revenues up by 11 per cent to £1.57bn and prices up by 4 per cent to £172, 475. But chairman John White said the company “doesn’t see much of an upturn” in the market this year.