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27th Aug 2009
House prices up fourth month in a row
The UK's biggest building society says the year-on-year decline has slowed significantly from 6.2% in July to 2.7% in August.
Martin Gahbauer, chief economist at Nationwide says this marks the fourth consecutive month of house price increases.
He says: "The three month on three month rate of change - generally a smoother indicator of the near term trend - rose from 2.7% in July to 3.3% in August, the highest level since February 2007.
"At £160,224, the average price of a typical UK property is still slightly lower than 12 months ago. However, the annual rate of change rose further in August, from -6.2% to -2.7%. Over the first eight months of 2009, the seasonally adjusted index of house prices has risen by 3.2%, though relative to the October 2007 peak it is down by 14.4%."
He adds: "There have been important developments in monetary policy this month, with possible implications for the housing market. Despite further signs of recovery in several key economic indicators, the Monetary Policy Committee decided to leave interest rates unchanged at 0.5% and surprised financial markets by injecting a further £50bn of new money into the economy via its quantitative easing programme.
"The MPC appears to believe that even if the economy does return to growth in the second half of 2009, it will take a long time before the spare capacity left behind by the recession is used up again. As a result, consumer prices may be under significant downward pressure over the next one-two years, necessitating an accommodative monetary policy to keep inflation in line with the 2% target.
The projections contained in the August Inflation Report signalled that this very loose monetary policy will remain in place for some time to come, with the base rate unlikely to increase until well into next year."
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