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House prices up by 0.6% in February according to Nationwide

Nationwide figures suggest UK housing market is reviving, but building society says rise could be temporary

House prices increased by 0.6% in February according to the Nationwide building society, supporting indications that the housing market is going through a revival. The increase took the annual change to 0.9%, compared with 0.6% last month, and means the average price of a typical home in the UK is now £162,712.

Robert Gardner, Nationwide’s chief economist, said: “Evidence that house prices picked up a little in February follows a series of data releases suggesting that economic conditions may not be quite as weak as feared after the UK economy contracted in the final quarter of 2011.

“Measures of activity in the housing market have also picked up, with the number of housing transactions rising by 23% year on year in January and the number of UK mortgage approvals – a leading indicator of sales – up 36%.”

However he warned that it was still not certain that the trend would be sustained: “Given the still challenging economic backdrop this increase in housing market activity may be the result of a temporary rise in first-time buyers entering the market to take advantage of the stamp duty holiday before it expires in March. If so, this may continue to support activity and prices in the near term before cooling over summer.”

Yesterday the Bank of England reported that mortgage lending rose by £1.6bn in January, twice the average for the previous six months. Earlier in the week the Land Registry said house prices had grown by an average of 1.1% in January, although these figures are calculated on a four month rolling basis. In contrast, the Nationwide found that house prices fell by 0.3% in January.

The Nationwide also revealed that although the British are known as a nation of homeowners, the rate of home ownership has fallen steadily in the last few years and a lower proportion of people own their home in Britain than in Ireland, Portugal, Belgium, Italy, Greece, Spain or Hungary.

The proportion of people renting has risen to 34%, the highest rate since 1988. While social housing tenants have remained stable at 17.5%, the proportion of private renters has soared to 16.5%.

Gardner said: “Despite the increase in the proportion of the population renting a home in recent years, the aspiration to eventually become a homeowner remains undiminished. The most recent English Housing survey suggests that 23% of people in social housing and 59% of those in the private rental sector expect to be able to buy their own home in future.

“However, the same survey found that, on average, people expect that this will take longer. Just 22% of private renters expect to take their first steps into the housing market within two years, down from 29% in 2008. Conversely, 47% expected it to take at least five years, up from 40% believing it would take this long in 2008.”

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