House prices fell by 0.5% in June, according to Halifax's house price index published this week, taking the average cost of a home down to £157, 713. House price inflation was still down by 1.9% in the second quarter of this year, though this is the smallest fall recorded since the first quarter of 2008. And as well as an upward hike in January, Halifax reported a 2.6% increase in house prices for May.

Martin Ellis, chief economist at Halifax, said the report provides further indications of a modest improvement in sales activity, albeit at a very low level. 

"Improvements in affordability and low interest rates have stimulated housing demand.  This, together with a low level of properties available for sale, has helped to stabilise activity and reduce the underlying rate of house price decline in recent months. 

"Whilst there have been encouraging recent signs of improvement, the outlook for the UK economy remains uncertain, with unemployment set to continue rising for sometime.  Overall, we expect to see a continuing mixed pattern of monthly house price rises and falls over the remainder of 2009."

David Smith, senior partner at property consultancy Carter Jonas, said: "Supply, or rather the lack of it, is the major driver of the current stabilisation in house prices, although there is also a discernible rise in demand. But let's not get carried away.

"While the number of people committing to a purchase is rising, attracted by competitive mortgage finance and low prices, overall transaction numbers remain modest.

"The problem is confidence. The moment we read reports that the worst of the recession is behind us, most recently by the British Chambers of Commerce, any sense of optimism is immediately negated by a piece of poor economic news.

"The housing market has started on the road to recovery, but it's going to be a long one. We are likely to bump around the bottom for some time yet."

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