Upward momentum in the housing market has continued into January with a rise of 1.2%, up from a rise of 0.5% in December, according to the latest report from Nationwide, although the three-month-on-three month rate of change has dipped from 2.3% in December to 2.1% in January.

The average house price now sits at £163,481, up 8.6% from last January, says the report, which also suggests that annual house price inflation could move into double digit territory in February for the first time since May 2007.

Martin Gahbauer, Nationwide’s Chief Economist, sounded positive for the housing market for the coming year: ‘Although there may still be some upward revisions to the initial estimates of economic growth, this won’t change the fact that the rebound in the housing market – and particularly house prices – has gone some way beyond the recovery in the overall economy. This is a reversal of the picture in 2007-2008, when the housing market deteriorated much more quickly and at an earlier point in time than the wider economy.’

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However, some economists are less optimistic for house prices this year: Ed Stansfield from Capital Economics said: ‘January’s rise was also the strongest for four months but it is too soon to conclude that the softening in the pace of house price increases, evident in the final three or four months of last year, has gone in to reverse. The three month on three month growth rate, which abstracts from the month-by-month volatility of the data, continued to ease.

‘The fact that house prices continued to rise in January is not surprising given the momentum with which they ended 2009. And even our forecast of a 10% drop in average house prices in 2010 envisages that they will rise in the early stages of the year.’