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Better than expected unemployment figures help UK property market, report shows

Prices rose 0.5% in November pushing the average property up to £162,764, a level last seen in August 2008, according to Nationwide. Prices are now 2.7% higher than a year ago.

But there are signs that the upward trend of recent months is slowing.

The 0.5% rise recorded for both October and November are the smallest since prices stopped falling in April.

The three month on three month growth rate, which is generally considered to be a smoother indicator of the underlying trend, also moderated during November to 2.8%, down from 3.5% in October and 3.8% in September.

Martin Gahbauer, Nationwide's chief economist, said that if prices remained roughly the same in December then they could end up being up to 5% higher than they were at the end of 2008.

Gahbauer said that better than expected unemployment figures had helped the property market as it is ‘crucially dependent’ on labour market conditions.

While unemployment had increased noticeably, the rise had not been as rapid or as pronounced as previously feared.

‘Part of the explanation for why unemployment has not risen to the levels implied by the recession's depth is that in many cases employers have opted to reduce working hours and pay rather than make employees redundant,’ he explained.

‘Even though workers who have been forced from full-time employment into part-time work will have experienced a reduction in income, the impact has been less severe than it would have been if they had lost their jobs completely,’ Gahbauer added.

This, coupled with low mortgage rates, meant that fewer people than expected were forced into selling their homes which in turn kept house prices steady.
 
These figures come the day after the Bank of England reported that the number of loans approved for property purchases had increased for the 11th consecutive month in October, rising to 57,345, their highest level since March 2008.

The housing market has recovered quicker than expected during 2009 as a shortage of properties on the market has pushed up prices.

However, many economists are predicting a return to price falls during 2010 as more homes are put up for sale.

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