House prices bounce back after fall

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House prices bounced back during March after falling for the first time in 10 months in February, figures showed today.

The average cost of a UK home rose by 0.7% during the month, largely reversing February's 0.8% drop, according to Nationwide.

But the latest rise is unlikely to end speculation over whether February's drop was caused by one-off factors, or marked the start of a new trend in the housing market.

Some economists had argued that the slide could not just be attributed to the end of the Government's stamp duty holiday and the bad weather seen during the early part of the year, but instead showed the recovery was running out of steam.

Nationwide's three-month-on-three-month index, which is generally seen as a smoother indicator of market trends, showed a further slowdown in price growth this month, with a rise of only to 1.6% during the three months to the end of March, compared with 1.8% for the three months to the end of February.

Figures released by the Bank of England earlier this week also showed that the number of mortgages approved for house purchase had dropped for the third consecutive month to a nine-month low, suggesting activity in the housing market continues to remain subdued.

Martin Gahbauer, Nationwide's chief economist, said: "The last two months are consistent with a relatively flat profile for house prices, and in line with the recent drops seen in buyer inquiries and house sales."

He said that with figures showing that the number of mortgages arranged for house purchase had failed to recover from the steep drop seen in January, the weakness in house sales at the beginning of the year may be due to more than just the snowy weather.

Mr Gahbauer said: "With greater than usual political and economic uncertainty ahead of the upcoming general election, potential homebuyers are proceeding cautiously."

But the group said the number of homes that were being put up for sale had not increased appreciably, so the impact on house prices of lower buyer activity had not been "too negative".

It said if this trend continued, it expected to see relatively few properties changing hands, but prices remaining fairly stable.

The annual rate of house price growth remained broadly unchanged during March at 9%, compared with 9.2% in February, while the average home now costs £164,519.

The recovery in the housing market continues to be strongest in southern England, with London leading the way with house price growth of 2.5% during the first quarter of 2010, while prices rose by 2.3% in both the South West and outer South East.

But prices continued to fall in the North West and Northern Ireland, where they dropped by 0.4% and 0.1% respectively, while in Scotland they were unchanged during the three months to the end of March.