House prices up 0.5 per cent in November

House prices are now rising at a more moderate pace than in the spring and summer months, according to the latest Nationwide house price index which reported a 0.5 per cent increase in November.

The average price of a house is now 2.7 per cent higher than a year earlier. At £162,764, the average house price is at a similar level to where it was in early 2006.

However, the three month on three month rate of change - which is typically a “smoother” indicator of the near term trend - dropped to 2.8 per cent from 3.5 per cent in October and 3.8 per cent in September.

Martin Gahbauer, chief economist at Nationwide, said this suggested house prices are now rising at a slower pace than in the previous months, when they experienced a “very strong bounce” from the early 2009 lows.

According to Nationwide, the outlook for the housing market remains dependent on labour market conditions.

While unemployment has increased this year, Mr Gahbauer said the rise has not been as rapid and pronounced as previously feared.

“Based on the latest labour market figures from September, it now looks unlikely that the jobless total will reach three million before the year is up,” he added.

But Mr Gahbauer said the future outlook for employment remained cautious as the public sector has not yet experienced any significant job losses. This is likely to occur when fiscal policy is tightened from next year onwards.

“Despite continued uncertainties about the future, the better than expected performance of the labour market has probably contributed to the surprise rebound in house prices this year,” Mr Gahbauer said.

“Together with the fact that mortgage rates have fallen sharply as a result of base rate cuts, this has meant that far fewer borrowers have fallen into arrears than would normally be the case in such a deep recession.”

As a result, the downward pressure on house prices from distressed sales has so far been “significantly lower than expected”.

Stephen Thornton of Rics warned the housing market would face a number of challenges in 2010 with the removal of the zero rate band of stamp duty and an increase in base rates.

“Arguably, it would however be even more of concern if house prices were to continue moving smartly ahead through the coming year. Accessibility is already a major issue with most traditional metrics of value highlighting the difficulty new entrants to the market have in taking a first step on to the property ladder.”