Page last updated at 14:47 GMT, Thursday, 2 April 2009 15:47 UK

'Surprise bounce' in house prices

House sale signs
Recent figures also showed a surprise jump in mortgage approvals

House prices rose in March for the first time since October 2007, according to the Nationwide.

The building society said that property prices increased by 0.9% compared with the previous month.

That reduced the annual rate of house price falls from 17.6% in February to 15.7% in March, with the average UK home costing £150,946.

Nationwide described the change as a "surprise bounce" and warned against concluding the market had turned.

"While the rise in prices in March is welcome, it is far too soon to see this as evidence that the trough of the market has been reached," said Fionnuala Earley, Nationwide's chief economist.

She added that cuts in interest rates and the Bank of England's move to expand the amount of money in the system - known as quantitative easing - would take time to work through into the housing market before there was a "sustained" recovery in house prices.

Nationwide's guarded comments on reading too much into the monthly figures are backed up by the three-month on three-month data, often seen as better indicator of underlying price trends.

The Nationwide survey found UK prices dropped by 4.2% in the first three months of 2009 compared with the last quarter of 2008.

Signs of recovery?

Ms Earley said that the significant slowdown in falling prices year-on-year was distorted by the sharp decline in the market last year.

Nationwide's figures show that prices of flats have been more volatile than other types of properties.

The figures come shortly after the Bank of England reported that mortgage approvals for house purchases in Britain rose more than expected in February.

The rise in mortgage approvals by all lenders - to 38,000 approvals in the month, up from 32,000 in January - is a good short-term indicator of actual lending and suggests this may now pick up.

House price graph

Recent surveys from the Royal Institution of Chartered Surveyors (Rics) have shown rising interest from prospective buyers.

Simon Hayes, economist at Barclays Capital, said that thanks to "the improvement in mortgage approvals and the rise in buyer enquiries that Rics has been showing, there are tentative indications the housing market may be stabilising".

"It may be six months to a year before we see a durable recovery," he added.

On Monday, the Nationwide said it was to buy the Dunfermline Building Society's branches, good loans and deposits.

The Scottish mutual was put up for sale after incurring losses of £26m.

National breakdown

During the first three months of the year, Northern Ireland experienced the largest annual rate of house price falls - down 29.6%. But this was the only part of the UK to see some moderation in the rate at which prices had fallen in the past three months.

Scotland had the slowest annual fall in prices in the first quarter of 2009, at 12.6%, but the rate of price falls "picked up significantly" in the first three months of the year - suggesting that price falls in Scotland are lagging behind much of the UK.

Wales saw an annual fall in property prices of 18.2%, but also witnessed the biggest drop in the three-month on three-month figures compared with the rest of the UK, at 8.3%. The Nationwide said that the quarterly figures in Wales tended to be more volatile than elsewhere.

In the English regions, house prices in the South, on average, fell faster than those in the North over the year.

The most expensive homes in the UK were in London, at an average price of £242,678, and the cheapest were in the north of England at £112,986.

National/regional house price breakdown

Region Average Price Quarterly % change Annual % change
North £112,986 -4.40% -14.60%
Yorkshire & Humberside £127,412 -3.90% -16.00%
North West £130,572 -3.20% -15.30%
East Midlands £126,673 -4.50% -17.20%
West Midlands £136,166 -3.90% -15.30%
East Anglia £143,987 -5.60% -19.90%
Outer South East £172,356 -4.50% -18.40%
Outer Metropolitan £209,667 -3.70% -17.40%
London £242,678 -5.30% -18.20%
South West £167,470 -2.90% -14.90%
Wales £123,990 -8.30% -18.20%
Scotland £130,975 -5.10% -12.60%
Northern Ireland £138,537 -4.10% -29.60%
UK £149,709 -4.20% -16.50%

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