House prices are back to the same level as they were last year after climbing in September for a fifth consecutive month, the Nationwide Building Society said yesterday.
However, economists warned that the increases were "unsustainable" and separate data from the Bank of England showed that Britons paid off £7bn of their mortgages in the second quarter, rather than borrowing against the value of their homes.
Nationwide said that house prices rose by 0.9 per cent last month to take the average price of a UK property to £161,816. Last month's data was the first time since March 2008 that the year-on-year change had not fallen into negative territory.
Martin Gahbauer, the Nationwide's chief economist, said: "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, all of which suggest that the most intense phase of the recession and financial crisis has probably passed."
For the three months to September, average prices were 3.8 per cent than in the previous quarter – the highest uplift since August 2004. While the seasonally adjusted index of house prices jumped by 4.1 per cent over the first nine months of 2009, prices are still 13.5 per cent below their peak of October 2007.
Economists also pointed out that the 0.9 per cent rise in September was substantially down on the 1.4 per cent rise in August and were the worst figures since April. Seema Shah, the property economist at Capital Economics, said: "The latest rises are being driven by a lack of property for sale, suggesting that the upturn is unsustainable.
"The bigger picture is that with the housing market still facing the threat of rising unemployment and tight credit conditions, prices will fall further."
Last month, the Ernst & Young Item Club forecast that house prices would start falling again in the first half of 2010 and would not return to their 2007 peak for more than five years. Brigid O'Leary, the senior economist at the Royal Institution of Chartered Surveyors, said: "An increase in property for sale would improve transaction levels but could also put some renewed downward pressure on house prices."
Separately, the Bank of England said UK households injected £7bn into housing equity in the second quarter, meaning that withdrawals against the value of homes shrank. The second quarter figure was flat on the £7.3bn injection into housing equity in the first quarter of 2009.
Howard Archer, chief UK economist at IHS Global Insight, said: "Housing equity withdrawal has been used significantly to support consumer spending in recent years. Consequently, the sharp turnaround from substantial withdrawals up to and including the first quarter of 2008 to a net injection of equity over the past five quarters has added to constraints on consumer spending."Reuse content