Nationwide: Prices up 1.1 per cent in October

Property prices in UK have continued to rise despite recent turmoil in the market, according the to the latest house price survey from Nationwide.

According to the survey, released today, average prices were up 1.1 per cent during October – the second biggest month-on-month increase during 2007.

The annual increase in house prices is now expected to be some 9.7 per cent, up from nine per cent in September.

This increase breaks the recent trend of slowing house price growth, but is unlikely to mark the start of a new upward trend, according to Nationwide.

"While some may be tempted to interpret October’s numbers as a sign house prices are immune to deteriorating affordability and tightening credit conditions, such a conclusion would be misguided," said Fionnuala Earley, Nationwide's chief economist.

"Most leading indicators of housing market activity are continuing to weaken.

Nationwide point to the lowest levels of new buyer enquiries for a number of years and recent information from the Bank of England showing a fall in mortgage lending as contributing factors to a potential long-term dip in the market.

There are also concerns over a tightening of lending criteria in the mortgage market.

According to Nationwide the average price of a UK property is now £186,044. This is £16,421 more than October last year.

Furthermore, the number of number of sellers on the market has remained historically low, and has been falling since May.

This could be attributed to high employment, which means fewer forced sales, or unwillingness to upgrade properties while uncertainty has dominated the market.

As such stock levels are still relatively low, restricting supply and providing some support to prices.

The Nationwide figures have prompted some organisation to moderate their predictions of future falls.

"The endless talk of the demise of the property market is, at the very least, a little premature. The 1.1 per cent gain in prices in October represents the highest month-on-month increase this year and provides a stark contrast to the fears of outright price declines," said Simon Rubinsohn, chief economist, Royal Institution of Chartered Surveyors (Rics).

Supply is, however an issue.

"One reason why the housing market is still proving resilient is the evident lack of supply," continued Mr Rubinsohn.

"Although the latest Rics survey shows new buyer enquiries falling sharply, it also points to a more stable pattern in the sales to stock ratio.

"This provides the clearest guide to the overall demand/supply balance for property and historically has been the best lead indicator of future developments in the housing market."