House price trends turn positive, reports Nationwide

House prices rose 0.9% in June, according to Nationwide. The building society also reported the first positive three-month rate of change since December 2007. However, prices are still 9.3% lower than a year ago, with the average house now worth £156,442.

Nationwide chief economist Martin Gahbauer said that it was the first time for months that the year-on-year fall had been in single digits.

He added that economists might have to revise forecasts: “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.

Gahbauer said that sales volumes were still historically low, making the price improvement remarkable. “What is unusual about the recent trend reversal… is that it has taken place against a background of transactions activity that is still very low by historical standards,” he said

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.

Gahbauer added that Nationwide had seen a relentless drop in the number of properties available for sale, constraining supply.