British house prices rose 1.0 per cent in November, the Nationwide Building Society said today, the strongest increase in four months and suggesting reports of a sharp property market slowdown may be exaggerated.
The big increase more than reversed October's 0.4 per cent fall which was the first in three years. But the annual rate still dipped to 15.0 per cent from 15.3 per cent the month before.
The pound rose while gilts and interest rate futures fell sharply as markets realised that the economy may not be as soft as recent figures have suggested, so any cuts in borrowing costs might still be a long way off still.
"It's hard to believe that prices really rose by as much as 1 per cent in the month, but the fact that they did rebound after October's fall does suggest that the underlying slowdown in the property market is not too severe," said Mr Ross Walker, UK economist at RBS Financial Markets.
The Bank of England has raised interest rates five times since last November in part to slow rampant house price inflation but recent signs of a turn in the market have led many analysts to conclude the next move in rates will be down, though not for some time.
The central bank is now predicting that house prices could actually fall for a period.
Nationwide, Britain's second largest mortgage lender, said it now expects house prices to rise by only 2.0 per cent over 2005 following a likely increase of between 13 and 14 per cent in 2004 and 16 per cent in 2003.
"Despite November's 1 per cent increase in property prices the recent trend in house price growth remains muted," said Mr Alex Bannister, Nationwide's group economist.
"The price of the average house has risen by an average of just 0.3 per cent per month over the last three months compared with an average of 1.0 per cent per month over the previous three months."
The lender said it expected monthly price increases to be much more uniform over the coming year, with small rises in some months and falls in others. But it warned that there were risks on both sides of its forecast. "Whilst it is becoming increasingly unlikely, the recent slowdown could prove to be a false dawn; the risk being that any further strong price increases could precipitate a sharper correction in the future," said Bannister.
On the flipside, the market was already more highly valued and vulnerable to economic shocks in buyer sentiment than in previous years. The average home cost 153,439 pounds in November, Nationwide said.