The price of an average house rose by 0.9% in June, compared with a rise of 1.3% in May, according to the Nationwide house price index. This puts the annual rate of change now at -9.3%, and the average price at £156,442 from £154,016 last month.

This is the first time since July 2008 that the year-on-year fall has been in single digits, Nationwide points out, while the three-month-on-three-month rate of change turned positive for the first time since December 2007 and now stands at 0.9%. If this pattern continues then by the end of the year prices should only show a small single digit fall for 2009 as a whole, says the report.

However, these conditions are unusual, in that prices have stabilised in circumstances which involve very low transaction rates and very low demand, metered by the lack of supply, but this cannot continue indefinitely, the lender has said. ‘While it is encouraging to see that prices are no longer seeing steep falls, there are still many obstacles in the way of a genuine and sustainable price recovery,’ said Martin Gahbauer, Nationwide’s chief economist. ‘To begin with abnormally low supply levels are unlikely to last forever, as the recent price increases should make previously hesitant sellers feel more confident about marketing their properties.

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He points out that demand needs to increase in line with supply to keep prices steadily rising, and this remains a tall order bearing in mind the financial climate in which 2009 finds us. ‘On balance, the stabilisation of house prices is a welcome surprise that did not seem likely at the beginning of the year. However, there are still considerable headwinds facing the demand side and until we see a more robust recovery in house purchase activity, it is too early to be confident about a full-scale recovery of prices.’

Property economists are also loath to call the bottom of the market from this latest data. Seema Shah from Capital Economics said: ‘We are doubtful that this stronger performance in house price growth will be sustained in the second half of the year.

‘For a start, despite having risen from their late-2008 record low, mortgage approvals are still desperately short of the levels which have historically been needed to stabilise house prices. What’s more, yesterday’s data showing that mortgage approvals barely rose in May suggests that the recovery in activity is on shaky ground.

‘The still-weak economic backdrop also does not provide much encouragement. The upshot is that, while house price falls of a similar intensity to last year will not be repeated, that does not imply that the floor for house prices has arrived.’

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