31 October 2007house price growth 'picks up'
Observers are trying to work out which way the market is going
UK house prices rose at their fastest rate in four months during October, mortgage lender Nationwide has said.
Prices rose 1.1% in October from the previous month, taking the average house price to £186,044, it said.
On an annual basis, house prices rose by 9.7% from the same month in 2006, up from September's figure of 9%.
However, the Nationwide said that it would be "misguided" to view the rise as proof that house prices were immune to problems in the financial markets.
The stock of unsold homes is still relatively low, and this is providing some residual support to prices
Fionnuala Earley, Nationwide chief economist
House prices in the three months to October rose by 1.9% compared with the previous three months, up from September's figure of 1.7%.
The three-month on three-month figure is often seen as a more accurate gauge of underlying price movements.
According to the Nationwide, house prices are currently being supported by a number of factors, including the low level of properties coming onto the market.
"Different factors could be driving the low level of instructions, including a reluctance to trade up amid current uncertainties and the fact that low unemployment is limiting the number of forced sales," said Nationwide chief economist Fionnuala Earley.
"The overall result is that the stock of unsold homes is still relatively low, and this is providing some residual support to prices," she added.
Other commentators viewed the Nationwide's figures with surprise.
"[It] seems at odds with the growing evidence of weaker buyer confidence, slowing mortgage demand and easing house price pressures shown by most other housing market indicators," said research firm Capital Economics.
"As such, we would be wary of interpreting today's data as evidence that the housing market remains robust," it added.
Recently other indicators have appeared to point to a slowing housing market, including a fall in mortgage approvals reported by the Bank of England and a drop in buyer inquiries as seen by estate agents.
Last week, the Land Registry for England and Wales reported that annual property price inflation had slowed in September to 8.7% from 9.4% in August, describing this as a "noticeable dip".
Other recent surveys from big mortgage lenders, the Royal Institution of Chartered Surveyors (Rics) and the Department of Communities and Local Government, have all been pointing in the same direction.
However, while there is evidence of a slowing in house price growth in many areas of the UK, it does not necessarily mean that the market will fall, the Nationwide said.
Referring to a report by the International Monetary Fund which claimed that UK house prices were overvalued, Ms Earley said it was "indisputable" that property values had climbed ahead of certain key indicators, particularly earnings.
But that did not mean that house prices were "destined to fall", she added. "In fact, in the absence of an early 1990s-style shock to unemployment or interest rates, they are unlikely to do so," she explained.
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