Housing market continues recovery

The price of a house in Britain increased by 1.6 per cent in August from July, taking the average price from £158,871 to £160, 224, according to the Nationwide. The rise is the fourth monthly gain in a row and the biggest for two-and-a-half years. The yearly rate of decline has slowed to 2.7 per cent, compared to the 6.2 per cent fall registered in July.

Key to the improvement is the ultra-low level of interest rates, with many low-cost mortgage deals on the market in line with the Bank of England’s 0.5 per cent base interest rate. Nationwide's chief economist Martin Gahbauer said: "The fall in debt serving costs has meant that fewer homeowners are under immediate financial pressure to sell than might have been expected in a recessionary economic background with rising unemployment."

Another positive factor is the lack of new property on the market, which has led to more buyers chasing fewer homes for sale. In a separate survey, London agent Cluttons said that selling times in the capital have halved over the past year. Sellers now have to wait an average of 4.7 months from putting their house up their sale to completion, versus 8.6 months a year ago. And Hamptons International has put the number of buyers per house at nine to one, a ration reminiscent of the boom years in 2006/7.

In spite of the good news, some caution was urged by analysts who pointed out interest rates will eventually rise and more property will come onto the market from distressed sellers as a result.

WHAT THEY ARE SAYING:Alex Brummer in the Daily Mail: "There is no reason to believe that the housing market is set for another boom. Obviously there is pent up demand, but the number of active buyers in the market remains low. With unemployment still rising and wage freezes widespread demand is not going to take-off. Recent rises in the share price of banks does not mean that they are going to relax lending criteria very soon. Most lenders will be seeking to maintain capital as the regulators roll out tougher rules." ·