House prices rise but sales are still in a record slump

The housing market continued its shaky recovery last month, with prices rising a modest 0.2%, but the number of property sales remained at a historic low.

Nationwide's house price index for July showed values are now just 0.4% lower than the same time a year ago.

"Sluggish demand for homes, combined with only a gradual rise in the supply of available properties, has helped to keep property prices relatively stable," said Robert Gardner, Nationwide's chief economist.

The second quarter saw only 204,000 house sales, the lowest figure in two years. And analysts predict the turbulent economy will see house prices drop back this year.

Although the Bank of England today reported mortgage approvals hit a 13-month high of 48,421 in June, that's still well below usual. Mortgage approvals have averaged around 90,000 a month since 1993.

Howard Archer, economist at IHS Global Insight, said: "We expect house prices to fall by around 5% from now through to mid-2012 before stabilising.

"We suspect that squeezed purchasing power, tightening fiscal policy, a softening labour market and worries over the economic outlook will weigh down potential buyers and dampen house prices."