Nationwide reports house price pick-up

House prices bounced back this month after December's fall, Nationwide building society said yesterday, boosting hopes that the property market has stabilised.

The price of the average property rose 0.4 per cent between December and January, leaving the annual rate at 12.6 per cent, the weakest since January 2002.

The country's second-largest mortgage lender said prices had been broadly stable for six months and that values ticked up by 0.25 per cent a month, compared with 1.7 per cent in the previous six months.

Alex Bannister, its group economist, said: "There are indications that sentiment may be about to turn more positive. While increased confidence about the outlook will bring buyers back to the market, they will be more price-conscious than in recent years."

He added that he expected prices to rise by 2 per cent during 2005 as a whole, but warned that this would include small rises in some months and small falls in others. The report fitted with anecdotal evidence from estate agents who had reported a marked upturn in buyer activity in the new year.

The minutes of this month's Monetary Policy Committee meeting showed that the Bank of England believed recent house price indices had turned out slightly stronger than expected. It ran counter to Wednesday's report from Hometrack, the property website, which said prices had fallen by 0.4 per cent this month.

Mr Bannister said: "It is increasingly a buyers' market with prospective buyers staying on the sidelines until the outlook becomes more certain."

Economists said the figures suggested that while the housing market was slowing, it was not collapsing.

Meanwhile, the UK no longer tops the European league of house price inflation, it emerged yesterday. France and Spain overtook Britain, which is now in third place, said the Royal Institution of Chartered Surveyors.