Published on : Thu, 29 Sep 2005 15:28GMT
by : Paul Dyson

LONDON - UK house prices continued their downward trend in September even though the mortgage lending was up indicating an increased level of interest in the market, says the latest monthly house price report from the Nationwide building society.

The average price of a house in the UK for the month of September was £156,517 as compared to the £153,727 prevailing at the same time last year. But house prices in the quarter rose by just about £134 indicating that even though the housing market was showing signs of revival, it is still 'flat.'

"Since the end of 2004 the monthly data has been relatively mixed, with several months of small falls and rises, but looking at changes over three months shows the underlying trend more clearly," said Fionnuala Earley, Nationwide's group economist. She added that if the calculations were based on this premise, house price growth had stalled in the three months to September, as there was no increase in those months.

The house price to earnings ratio in recent times was higher than that prevailing in the 1990s encouraging talk of a housing 'bubble', even though this is far from the current situation, "This may help to explain why we have seen a surprisingly swift return of buyers to the market. The number of house purchase approvals increased to 97,000 in July, their highest level for a year and just above the average for the last 12 years," Ms Earley said.

But the fact that the house prices in September were 0.2 percent less than that of August pushed the annual growth rate to just about 1.8 percent, the lowest in over nine years, Nationwide said adding that such dismal performance last occurred in May 1986. But mortgage lending continued to show impressive figures with 107,000 approvals in the last month, up from 99,000 in July, according to the Bank of England's figures.

Howard Archer, chief economist at Global Insight said, "Most survey evidence suggests that more realistic pricing by sellers has been a significant factor in rising buyer interest. We're sticking to our view that house prices are likely to remain relatively flat for an extended period."