House prices post unexpected rise

House prices staged a modest recovery in February, increasing from 0.3% the previous month.

The increase surprised analysts who had been expecting a fall of 0.2%.

It was only the second gain recorded since May last year and left the average home costing £161,183.

But Nationwide said in its monthly House Price Index that the property market is still “treading water”.

The three month on three month measure of house prices – which is generally regarded to be a better measure of underlying trends – was flat in February at -0.1%.

Robert Gardner, Nationwide’s chief economist, said he expected transaction levels and prices to remain “sluggish” in 2011.

“Given that the recovery hit a soft patch at the turn of the year and looks set to remain sluggish in the year ahead, the property market is likely to follow suit, with relatively low transaction levels and prices moving sideways or modestly lower through 2011.”

Despite the month on month rise prices were down on February last year by 0.1%.

Gardner warned that a lack of first time buyers entering the market was depressing the housing market.

“First time buyers play a crucial role in housing market dynamics. With the supply of housing fixed in the short term, the flow of new buyers into the market has a major impact on prices and activity.

“Therefore, the fact that first time buyer numbers are well below the levels prevailing before the financial crisis casts a shadow over the outlook for the wider market.”

Lee McDarby at Investec Corporate & Institutional Treasury said: “Overall house prices were expected to fall by 0.2% in the month of February. The markets were left reassured when the figure indicated that house prices actually rose by 0.3% over the period.”