UK house prices up for 3rd month in July

House prices in Britain rose for a third month running in July, the Nationwide Building Society said on Thursday, providing further evidence that property prices may have stabilised despite low turnover.

The mortgage lender said house prices rose 1.3 percent this month, the fourth increase in five months. That took the annual rate of decline to 6.2 percent, its smallest drop in more than a year.

Martin Gahbauer, Nationwide's chief economist, said tight supply, pent-up demand and historically low interest rates had been enough to produce a bounce in prices despite the worst recession in decades.

"There is now a reasonable chance prices could end the year slightly higher than where they started," he added. "Only a few months ago, such an outcome would have appeared unthinkable."

Even if prices remain unchanged for the rest of the year, the annual rate will continue to improve due to the sharp fall in prices at the end of last year.

The three-month on three-month rate of change, a less volatile measure, rose by 2.6 percent, its highest reading since February 2007.

Nevertheless, the building society cautioned that the pick-up in prices may not be sustained.

"If prices continue to increase at the rate of the last three months, they will soon rise to levels that would be noticeably out of line with earnings, rents and other fundamental determinants of housing valuations," said Gahbauer.

A shortage of credit helped push house prices down by almost a fifth last year but all the main house price surveys are now pointing towards a stabilisation in prices at least.

Bank of England figures on Wednesday showed mortgage approvals rose to a 14-month high in June though total consumer lending rose by its smallest amount on record.