Nationwide: House prices up 0.7%

Average house prices defied depressed expectations to grow by 0.7 per cent in September, according to new research released today.

This is up from the 0.6 per cent growth recorded in August, according to the Nationwide house price survey.

However, despite the rise, house prices are now growing at nine per cent annually, a slight fall from the 9.6 per cent predicted in August.

"House prices recorded a reasonably strong gain of 0.7 per cent between August and September, seemingly shrugging off the unsettled events of the past month," commented Nationwide's chief economist Fionnuala Earley.

"Despite this increase, the 12 month rate of house price inflation came down from 9.6 per cent in August to nine per cent, as we are now entering a period during which house prices gains were particularly strong in 2006."

The average house price in the UK is now £184,723, according to Nationwide.

However, the underlying trends were less positive.

"The three month on three month rate of price growth – often the smoothest indicator of underlying momentum – slowed from two per cent to 1.6 per cent, the lowest level since July 2006.

"Overall, house prices defied the gloomy predictions of some recent headlines, but their underlying growth is still on a decelerating trend," continued Ms Earley.

Other trends also gave cause for caution.

"A slowdown in consumer demand now looks likely to pull economic growth below its trend rate in the coming quarters and take further froth out of the market.

"A worst case scenario is for the economy to stagnate or fall into recession, with large job losses forcing homeowners into unwanted sales," concluded Ms Earley.