House prices rise but market remains weak

House prices rose in October but have fallen slightly over the past three months as difficult economic conditions kept the market under pressure, Nationwide has said.

The building society’s house price index showed prices gained 0.4 per cent in the past month - the strongest monthly gain since February, and higher than September’s 0.1 per cent rise and August’s 0.6 per cent fall.

Compared with 2010, prices were up 0.8 per cent in October, beating economists’ expectations for a 0.5 per cent increase year-on-year, but remaining too small to indicate real growth in the market.

Barclays Capital economist Chris Crowe said the data showed that “the market continues to tread water, with mortgage lending flat at subdued levels.”

Rachael Waring at Panmure Gordon said: “We believe that house price data will remain volatile across 2011. Our central case remains based on modest deflation in 2011 (-2%), and flat pricing in 2012, with low levels of transactions.”

The poor performance of the previous two months meant prices were down 0.2 per cent on the quarter, while asking prices fell back to £165,650 from a high of £168,781 in July.