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Last Updated: Wednesday, 31 October 2007, 09:58 GMT
UK house price growth 'picks up'
Woman looking in estate agent's window
Observers are trying to work out which way the market is going
UK house prices rose at their fastest rate in four months during October, mortgage lender Nationwide has said.

Prices rose 1.1% in October from the previous month, taking the average house price to 186,044, it said.

On an annual basis, house prices rose by 9.7% from the same month in 2006, up from September's figure of 9%.

However, the Nationwide said that it would be "misguided" to view the rise as proof that house prices were immune to problems in the financial markets.

Propped up

The stock of unsold homes is still relatively low, and this is providing some residual support to prices
Fionnuala Earley, Nationwide chief economist

House prices in the three months to October rose by 1.9% compared with the previous three months, up from September's figure of 1.7%.

The three-month on three-month figure is often seen as a more accurate gauge of underlying price movements.

According to the Nationwide, house prices are currently being supported by a number of factors, including the low level of properties coming onto the market.

"Different factors could be driving the low level of instructions, including a reluctance to trade up amid current uncertainties and the fact that low unemployment is limiting the number of forced sales," said Nationwide chief economist Fionnuala Earley.

"The overall result is that the stock of unsold homes is still relatively low, and this is providing some residual support to prices," she added.

Other commentators viewed the Nationwide's figures with surprise.

"[It] seems at odds with the growing evidence of weaker buyer confidence, slowing mortgage demand and easing house price pressures shown by most other housing market indicators," said research firm Capital Economics.

Nationwide and Halifax house prices graph

"As such, we would be wary of interpreting today's data as evidence that the housing market remains robust," it added.

But Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors, said the Nationwide's survey should be taken seriously.

"The endless talk of the demise of the property market is, at the very least, a little premature," he said.

"The 1.1% 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."

Slow down?

Recently other indicators have appeared to point to a slowing housing market, including a fall in mortgage approvals reported by the Bank of England and a drop in buyer inquiries as seen by estate agents.

Last week, the Land Registry for England and Wales reported that annual property price inflation had slowed in September to 8.7% from 9.4% in August, describing this as a "noticeable dip".

Other recent surveys from big mortgage lenders, the Royal Institution of Chartered Surveyors (Rics) and the Department of Communities and Local Government, have all been pointing in the same direction.

However, while there is evidence of a slowing in house price growth in many areas of the UK, it does not necessarily mean that the market will fall, the Nationwide said.

Referring to a report by the International Monetary Fund which claimed that UK house prices were overvalued, Ms Earley said it was "indisputable" that property values had climbed ahead of certain key indicators, particularly earnings.

But that did not mean that house prices were "destined to fall", she added.

"In fact, in the absence of an early 1990s-style shock to unemployment or interest rates, they are unlikely to do so," she explained.

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