House prices increased for the third month in a row during November but are still down annually, Nationwide data shows.
The lender’s latest House Price Index shows average prices rose 0.2% on a monthly basis in November to £258,557 - on a seasonally adjusted basis - but were down 2% annually.
Prices were still down on a monthly basis without seasonal adjustment.
Robert Gardner, Nationwide's chief economist, said that while annual growth remains weak, is the strongest performance for nine months.
He said the market has been helped by shifting expectations on interest rates that have eased affordability pressures, but issues remain.
Gardner said: “A rapid rebound still appears unlikely. Cost-of-living pressures are easing, with the rate of inflation now running below the rate of average wage growth, but consumer confidence remains weak, and surveyors continue to report subdued levels of new buyer enquiries.
“Moreover, while markets are projecting that the next Bank Rate move will be down, there are still upward risks to interest rates. Inflation is declining, but measures of domestic price pressures remain far too high.
“Policymakers have cautioned that it is too early to be talking about interest rate cuts. Indeed, three of the nine members of the Bank of England’s Monetary Policy Committee voted to increase Bank Rate at its meeting in early November, though the remaining six preferred to hold at 5.25% for the time being.”
Some commentators have suggested the price increases are a reflection of fewer sales at higher prices but others remain more confident of a recovery.
Tom Bill, head of UK residential research at Knight Frank, said: “If we are not at the bottom of the current slowdown in the UK housing market, we must be close.
“Price indices are potentially more volatile due to low transaction numbers but sentiment has improved in recent weeks as the worst of the economic data moves behind us. Inflation is below 5%, the best five-year fixed-rate mortgage has fallen to less than 4.5% this week and speculation is focussed on the timing of the next rate cut not the size of the next rise. After a flat Autumn, the UK housing market should see a spring bounce in 2024 provided a general election is not called in the first half of next year.”
Nathan Emerson, chief executive of agency trade body Propertymark, added: “There is no denying 2023 has been a very uneven year for the UK housing market. We have seen the most ‘unperfect storm’ of high inflation and high interest rates giving many households an unpresented and near unworkable scenario each month.
“While there are indications a turning point maybe on the horizon, the dust needs to fully settle and we must remain prudent. Andrew Bailey, Bank of England Governor, recently suggested there will be no quick drops in base rate for the foreseeable future to keep inflation in check – so ultimately the pressure will remain on many households for a while longer yet.
“Propertymark remain optimistic the entire UK housing market will steadily gain traction, but it’s unlikely to be a quick process.”