House values increased by 0.7% during March bringing the annual rate of house prices “relatively high” at 9%.
The latest figures from Nationwide show house prices recovered in March following a 0.8% fall the previous month.
However, the three-month rate of inflation – often considered to be the most accurate measure of house prices – fell slightly to 1.6% from 1.8% in February.
At £164,519, the average price of a typical property is 9% higher than a year earlier.
"The last two months are consistent with a relatively flat profile for house prices, and in line with the recent drops seen in buyer enquiries and house sales,” says Martin Gahbauer, Nationwide's chief economist.
He adds that the weakness in house sales at the start of the year could have been due to more than just snowy weather. This follows new figures from the Bank of England that show mortgage approvals for house purchases fell in February by just over 1,000 to 47,094.
“With greater than usual political and economic uncertainty ahead of the upcoming general election, potential homebuyers are proceeding cautiously,” says Gahbauer.
“At the same time, the number of homes for sale has not increased appreciably, meaning that the impact of lower buyer activity on house prices has not been too negative.”
If this trend continues, he warns that fewer properties are likely to exchange hands, keeping prices fairly stable.
Ed Stansfield, chief property economist at Capital Economics, says the fact that February’s price drop was reversed in March suggests the property recovery “still has some life”.
But he adds: “With mortgage lending remaining subdued in February, the labour market still weakening and affordability on the slide once more, we think that the slowdown in the pace of house price growth will turn into renewed falls later this year.”
Stansfield believe that the housing market in the UK remains overvalued: “Indeed,
the fact that house prices are reported to have risen by 9% over the past year while average earnings have risen by under 1% illustrates that last year’s recovery in house prices lacks any fundamental economic basis.”
In his Budget last week, Alistair Darling raised the stamp duty threshold for first-time buyers to £250,000 – a move that many hope will help boost the housing market recovery.
According to Nationwide, this will produce a savings of £1,368 for the average new entrant into the property market.
“At a national level, the vast majority of first-time buyers should benefit from the holiday, though with the average London house price at £243,163 for first-time purchasers, a significant number of new buyers in the capital will miss out on the savings,” says Gahbauer.
During the previous stamp duty holiday – for properties bought for less than £175,000 between September 2008 and the end of December 2009 - there was a “modest” increase in house purchase transactions, with most of the pick-up seen during the second half of the exemption period.
However, Gahbauer says that transactions remained well below normal levels. The rise in prices could also have been the result of record-low interest rates.
"We of course do not know what the housing market would have looked like without last year's stamp duty holiday, and it may well be that the level of transactions would have stayed even lower for longer,” he adds.
“Undoubtedly this new measure will be welcome relief for aspiring first-time buyers. However, based on past experience it may not be enough on its own for the housing market to make a full recovery."
A lack of mortgage availability is still a concern.
Brian Brown, head of research at Defaqto, says: “[The stamp duty holiday] will clearly help the majority of first-time buyers who can get on to the housing ladder, but, the hardest part of doing so is raising the necessary deposit in the first place. Mortgage rates are very much higher on low deposit mortgages where they are available."
And political uncertainty may also be holding people back, says David Smith, senior partner at property consultancy Carter Jonas - who is not convinced that raising the stamp duty threshold will have much effect on the current market.
"Once the general election is behind us and a clear strategy to tackle the deficit in place, we may see a longer-term trend emerge, although this will be very much dependent on the state of the economy and the availability of mortgage finance," he adds.
"Over the past month, buyer enquiries have fallen and stock levels have risen and so next month we may well see another fall in house prices, once again reinforcing the volatility in the market at present."