September House Prices
House prices rose to their highest level in a year in September and there was the first increase in house-building in nearly two years, but this was not enough to stop an overall decline in construction activity.
Moreover, economists warned that the recovery in house prices from February's near five-year low was slowing and Bank of England figures showed existing homeowners repaid mortgage debt at a near-record rate in the three months to June.
Building society Nationwide said house prices rose 0.9 percent in September, slightly better than economists' forecasts of 0.7 percent but less than August's 1.4 percent rise.
September's gain left prices unchanged on the year -- the first time since March 2008 that prices have not declined on a year-on-year basis. The average price of a home is now 161,816 pounds -- 13 percent below the peak in October 2007 but 10 percent up on February's level.
Economists said support for the housing market was largely coming from a lack of supply of new properties and the greater affordability of those properties that are on the market.
"To the extent that downside risks have eased and confidence has improved it may be that prices are rising back to more appropriate levels ... while still down significantly from the peak," said Allan Monks, UK economist at JP Morgan.
"If these arguments are correct, the strength of the recent price gains is likely to loose some steam in due course," he said.
Nationwide economist Martin Gahbauer said high unemployment and restrictive credit conditions put a limit on how fast demand could increase, meaning it was unlikely house prices would continue to increase at the strong rate seen in recent months.
Economists also said higher prices would be likely to increase supply, tempting back sellers who had been put off by sharp price falls earlier in the year.