House prices still 'treading water', says Nationwide

House prices inched up 0.4% in October but the outlook for the market is still bleak, new figures today revealed.

At £165,650 the average price of a home is now 0.8% higher than it was a year ago – the first annual rise in house prices in six months, according to Nationwide.  

The report also revealed that the proportion of house sales in desirable or affluent areas has edged up. One exception to the trend, however, is a slight fall in activity among well-educated professionals living in major towns and cities – which may reflect the subdued number of first-time buyers at present, Nationwide said.

Robert Gardner, Nationwide’s chief economist, said: ‘Given the challenging economic backdrop, October’s data is encouraging but it doesn’t fundamentally change the picture of a housing market that is treading water.’

‘Property transaction levels remain subdued, and prices essentially flat compared to last year,’ he said.

Looking ahead, Gardner warned that with the UK economic recovery expected to remain sluggish, house price growth is likely to remain weak in the period ahead, with prices moving sideways or drifting modestly lower over the next 12 months.

Tracy Kellett, managing director of home buying agency BDI Home Finders, said: ‘Over the course of the next year we're likely to see a significant widening of the North/South divide due to the greater exposure of the North to the deterioration of the economy.’

‘The South, too, is likely to see a sharp slowdown in transactions as the economy enters a big freeze,’ she said. ‘Central London is likely to remain stable next year, with potentially a small rise. This will be purely due to demand from overseas investors who continue to see London as a safe haven.’

Nicholas Ayre, director of the property buying website Home Fusion, said: ‘If unemployment continues to rise, then we could see more properties come onto the market as people are forced to sell. This could provide further downward pressure on prices.’

The news comes just one day after property website Hometrack said falling demand pushed house prices down 0.2% in October and warned of an ‘acceleration’ in price falls over the coming months.

Land Registry figures released last week also showed a dip in the market, with prices down 2.6% on last year, taking the average price of a property in England and Wales to £162,109.

A new confidence survey by Halifax today revealed that more people expect house prices to fall rather than rise over the next year.