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House prices really did rise in July - that seems to be the consensus as both the Nationwide and the Halifax issued reviews of the market showing prices up last month by 1.3 per cent and 1.1 per cent respectively.

Prices remain lower than at this time last year; the Nationwide says that they are down by 6.2 per cent over the last 12 months and the Halifax puts the figure at 12.1 per cent.  Nevertheless, both lenders are adamant that the trend is broadly upwards. 

Martin Gahbauer, Nationwide's Chief Economist, said recently that: "There is now a reasonable chance that prices could end the year slightly higher than where they started", adding: "Only a few months ago, such an outcome would have appeared unthinkable".

And Martin Ellis, the housing economist at the Halifax pointed out:  "In the three months to July, prices were 0.8 per cent higher than in the previous three months.  So far this year, house prices have fallen by less than 1.0 per cent".  In fact, almost all of the fall in house prices this year happened before May and the last three months have reversed a large part of those falls.

Seeking to explain the apparent turnround in the market, Martin Gahbauer said: "The very sharp decline in transactions over the course of 2008 produced a fairly large pool of prospective purchasers who were ready and able to buy in principle, but did not want to do so in the very uncertain conditions prevailing when the banking crisis was at its peak last autumn. When it became clear that government interventions around the globe had stabilised the banking system and prevented a worst-case economic outcome, some of this pent-up demand re-entered the market, with the added assistance of very low interest rates. Although the resulting rise in transactions has not been that dramatic, it has been enough to produce an upward bounce in prices because it coincided with very low levels of supply on the market.

And Martin Ellis from the Halifax echoed those comments:  "Demand for homes has risen, albeit from a very low base.......... driven by improvements in affordability and low interest rates.  Higher demand has combined with the low levels of property available for sale to boost sales activity from exceptionally low levels and support prices over the past few months".

The Nationwide cautioned, however, that prices are not set to soar: "The improvement in housing market conditions does not mean that the positive price trends of recent months can be extrapolated into the future in a straight line. If prices continue to increase at the rate of the last three months, they would soon rise to levels that would be noticeably out of line with earnings, rents and other fundamental determinants of housing valuations. It is unlikely, therefore, that price increases can be sustained for long at the very strong rate observed over the last few months".