House prices rose by 0.9% in June, building upon the improving trend seen over the last several months, according to Nationwide.

At £156,442, the average house price across the UK was still 9.3% lower than last year, however this is the first time since July 2008 that the year-on-year fall has been in single digits.

Commenting on the figures Martin Gahbauer, Nationwide's Chief Economist, said: "If the pattern of price movements seen in the first half of the year is repeated over the second half, then prices could show only a small single digit fall for 2009 as a whole. This would represent a stark shift from trends seen at the turn of the year, when most indicators were pointing to a repeat of the large declines seen in 2008.


"House prices have now risen in three of the last four months, suggesting that the improvement that began to show up in March represents more than just statistical noise. What is unusual about the recent trend reversal, however, is that it has taken place against a background of transactions activity that is still very low by historical standards.

"Although it has risen from the all-time record low reached in November 2008, the industry-wide number of mortgages approved for house purchases is still 55% below its long-run average and 33% below the trough reached in the 1990s downturn. Normally, such a low level of house purchases would be associated with falling house prices."

He added: "Alongside the low level of mortgage approvals, however, there continues to be a relentless drop in the stock of property available for sale, as potential sellers and builders have responded to depressed demand conditions by reducing the supply of property coming onto the market."

However, the results show that there are still considerable headwinds facing the demand side and until there is a more robust recovery in house purchase activity, it is too early to be confident about a full-scale recovery of prices.

(CD/JM)