House prices go up by 1.2% in month

House prices jumped by 1.2% during May, figures have shown

House prices rose by 1.2% during May as buyers continued to return to the market, figures have shown.

It is the second time in three months that house prices have risen, with the cost of property also increasing by 1% in March, while a fall of just 0.3% was recorded in April, according to Nationwide Building Society.

The latest jump pushed average prices up to £154,016, and caused the annual rate at which property values are falling to slow sharply from 15% to 11.3%.

But Nationwide warned it was too early to call an end to the house price correction, although it added that conditions in the market had improved during the past few months.

Martin Gahbauer, Nationwide's chief economist, said: "Although the short-term trend in house prices has clearly improved from where it was at the beginning of the year, it is still too early to say that the market is turning definitively.

"During the downturn of the early 1990s, there were many months during which prices rose, only to fall back down again in subsequent periods.

"In the current downturn, the combination of rapidly rising unemployment and tight access to credit implies that the last of the price declines has probably not been seen yet."

But he added that the improvement in house price trends suggested further price declines may occur at a less rapid pace than in 2008.

The quarter-on-quarter rate of change, which is generally seen as a less volatile indicator of price trends, improved from falls of 3% during the three months to the end of April, to ones of just 0.5% during the three months to the end of May - the lowest level since January last year.

Nationwide said the recent improvement in prices was likely to have been caused by a shortage of homes on the market, due to a combination of lower building levels and sellers either delaying putting their home on the market, or opting to rent it out instead.