BRITISH HOUSE prices rose for a third consecutive month in July, the Nationwide Building Society said yesterday.

The data provides further evidence that property prices may have stabilised despite low turnover.

The mortgage lender said house prices rose 1.3 per cent this month, the fourth increase in five months, reducing the annual price fall to 6.2 per cent, its smallest in more than a year.

Martin Gahbauer, Nationwide’s chief economist, said tight supply, pent-up demand and historically low interest rates had been enough to produce a bounce in prices despite the worst recession in decades.

“There is now a reasonable chance prices could end the year slightly higher than where they started,” he added. “Only a few months ago, such an outcome would have appeared unthinkable.”

Even if prices remain unchanged for the rest of the year, the annual rate will continue to improve due to the sharp fall in prices at the end of last year.

The three-month on three-month rate of change, a less volatile measure, rose by 2.6 per cent, its highest reading since February 2007.

Sterling rallied on the data, with currency strategists saying the news should boost consumer and investor confidence, but economists warned that actual sales volumes were thin, casting doubt on the sustainability of price rises.

The Nationwide also cautioned that the pick-up in prices may not be sustained. “If prices continue to increase . . . they will soon rise to levels that would be noticeably out of line with earnings, rents and other fundamental determinants of housing valuations,” Mr Gahbauer said.

A shortage of credit helped push house prices down by almost a fifth last year but all the main house price surveys are now pointing towards at least a stabilisation in prices.

– (Reuters)