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UK residential property prices rise for first time in 16 months

The monthly housing price index published by the Nationwide Building Society showed a 0.9% increase last month, the first since October 2007. The price of an average home increased above £150,000.

But economist said the figure should not be taken as a sign that the UK property market is one the road to recovery. Colin Ellis, economist at Daiwa Securities described the reading as likely to be a blip. 'Even if these glimmers of hope continue to build, households still need access to affordable credit before a sustainable recovery can ensue,' he explained.

Simon Hayes, economist at Barclays Capital, said that the figures along with this week's rise in mortgage approvals and recent increases in buyer interest could be a sign of stabilisation but nothing more.

Indeed Nationwide's chief economist, Fionnuala Earley, warned against reading too much into the latest data. 'It is too early to say that we are reaching the trough. It is never wise to put an emphasis on one month's figure,' she said.

Asked how she explained the rise, she said it could be simply that people who had put off moving last year were now deciding that they had waited long enough and now had to move.

She added that transaction levels are still low and even although mortgage costs and interest rates are lower people are still concerned about the recession and unemployment.

'It is still too soon to say that this will be the beginning of sustained house price rises and a reflection of a wholesale return of confidence to the market,' she added.