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UK prices return to 2008 levels - 14 October 2009

In its latest review of the UK housing market, Nationwide has reported that the average value of a home rose by 0.9 per cent in September, with prices increasing for the fifth consecutive month.

The rise takes the year-on-year rate of change out of negative territory for the first time since March 2008.

According to the lender the value of the average home has returned to £161,816, or the same level as a year ago, compared with £160,224 in August.

The three-month-on-three-month rate of change, which is generally regarded as a smoother indicator of the near-term trend, rose from 3.3 per cent in August to 3.8 per cent in September, attaining its highest level since August 2004.

The building society’s chief economist, Martin Gahbauer, comments: "Over the first nine months of 2009, the seasonally adjusted index of house prices has risen by 4.1 per cent, though relative to the October 2007 peak it is still down by 13.5 per cent."

Mr Gahbauer goes on to warn: "One of the key questions facing the outlook for house prices is whether the supply of homes available for sale will remain at current lows."

He explains that trends in the rental market are worth watching on this point as many home movers have let their old properties to enable a move, rather than sell.

The surge in so-called "accidental landlords" has therefore limited the supply of property for sale and driven down rental yields.

However, recent improvements in house prices are tempting accidental landlords back to the sales market, "with possible negative implications for house prices", says Mr Gahbauer.

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