The latest Nationwide house price index found prices rising 1.2% in May from £151,861 to £154,016 putting the annual rate of change at -11.3% up from -15% in April.

However, the lender is keen to point out these results are not necessarily a turning point for good in the overall downwards trend. Martin Gahbauer, Nationwide’s Chief Economist commented: ‘Although the short tem trend in house prices has clearly improved from where it was at the beginning of the year, it is still too early to say that the market is turning definitively. During the downturn of the 1990s there were many months during which prices rose, only to fall back down again in subsequent periods.

‘Nonetheless the improvement in house price trends is consistent with signs of stabilisation in several other economic indicators and suggests that any further price declines may occur at a less rapid pace than in 2008.’

Supply and demand are crucial in determining house prices and, the report says, stock levels continue at an all-time low although low rents and financial pressures are likely to encourage reluctant landlords to bite the bullet and put their properties on the market at a realistic price in the coming few months as opposed to holding out as many owners have been doing until now.

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This will have the effect of facilitating more house price drops as supply increases, ‘however the ultimate outcome for prices depends as much on the development of demand as it does on supply dynamics,’ continued Mr Gahbauer. ‘If this buyer interest translates into actual sales and outweighs any potential increases in supply then the recent moderation in price falls may continue.’

Economists remain gloomy, however. Seema Shah from Capital Economics said: ‘Of course, a recovery has to start somewhere and buyer interest at least is returning. However, given how far it declined in the previous two years, buyer interest will need to improve significantly further if it is produce the necessary increase in mortgage approvals. Unfortunately, given the poor economic backdrop, sharply rising unemployment and still tight credit conditions, this remains a distant prospect. Expect further house price declines in the coming months.’

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