House prices rise by half a per cent

Tuesday, 1 March 2005 12:00 AM

House prices rose by half a per cent in February according to the latest survey from Nationwide Building Society.

The average property now costs £152,879; 10.2 per cent higher than the same time last year.

This follows figures for January, which recorded a 0.4 per cent rise, the mortgage lender added.

However, despite these successive rises, Nationwide also found that homeowners expect the price of an average home to increase by just one per cent over the next six months.

"Housing market activity, which had been slowing throughout the second half of last year, appears to have bottomed out. Following the lull towards the end of last year, homeowner and prospective buyer sentiment has stopped deteriorating and buyers may now start returning to the market," said Alex Bannister, Nationwide's group economist.

"Monthly house price inflation over the last three months has averaged 0.3 per cent a month compared with the 1.7 per cent a per month over the same three-month period a year earlier."

But despite these rises, Nationwide remains cautious about the housing market.

"The likelihood remains that price growth will be muted with small rises in some months being offset by small falls in others," said Mr Bannister.

He added: "The biggest risk has always been that generalised price falls might occur as a result of panic sales in a market with low transaction volumes.

"[But] There are no obvious triggers on the horizon that might result in significant house price falls.

"Evidence from the Nationwide Consumer Confidence survey shows that homeowner expectations of future house price growth declined sharply during the second half of 2004 but have been broadly stable since then. An additional survey carried out by Nationwide shows that homeowners now expect prices to rise by just one per cent over the next six months".

Economists, commenting on the figures, backed up this view of a confident homeowner.

Howard Archer, chief UK economist for Global Insight, noted: "The 0.5 per cent rise in house prices reported by Nationwide for February, following a rise of 0.4 per cent in January, is further evidence of the resilience of house prices despite the marked slowdown in market activity since mid-2004."

However, there are large discrepancies between reports into the housing market.

Yesterday Hometrack, which monitors prices at estate agents, found property prices fell 0.2 per cent in February - the eight month in a row where it has seen values drop. But even this report found positive signs.

Hometrack economist John Wriglesworth predicted that the number of positive indicators means that house prices are set to reverse their eight-month decline in March.

"Commentators forecasting a housing market crash will soon have to revise their forecasts," he asserted.

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