House prices rose by 3.5% in England and Wales in the last quarter according to the Land Registry?s Residential Property Price Report for July ? September. The figures show that the market has cooled substantially since mid 2004 but prices in the last quarter were 4.9% higher than in April-June.

?The Land Registry figures for the third quarter do not reveal anything unexpected. They indicate that generally house prices have remained fairly constant with a small but steady increase in prices?, states Peter Edwards from Knight Frank Country House Department.

Property Economist Ed Stansfield estimates that house prices rose by 0.7% this quarter, reversing the previous quarter?s decline. Similarly, residential property sales have improved since the beginning of the year, down 15.4% as opposed to 20-25%, supporting reports by Halifax and Nationwide that buyers are returning to the market.

Estate agents are optimistic about the future: ?Increased activity in the market coupled with stronger city bonuses forecast has resulted in a renewed optimism in how the market will perform in the New Year?, explains Mr Edwards.

Nevertheless, the market is still relatively subdued and economists claim that it will be up to six months before the significance of the recent increased activity levels will be fully understood. ‘The Land Registry figures show that turnover is continuing to improve from the very low levels of early 2005, but not fast enough to stop 2005 looking like the lowest turnover year for 30 years,’ admits Jim Ward Director of Research for Savills.

Regionally, the picture remains varied but only in the South West have consecutive house price falls been noted. Despite not predicting a sustained upturn in prices, property economists admit that the figures are far from negative:

?Although they are a lagging indicator, today?s figures will do little to dampen growing hopes that the housing market has turned a corner,? Mr Stansfield added.

‘We agree that prime markets in London and the South East have turned a corner and we are expecting growth in prime markets to continue into 2006, with growth in prime central London forecast at 5% and the other prime markets following,’ Mr. Ward continues, ‘However, we are expecting the mainstream indices to show the market moving sideways during the remainder of 2005 and into 2006, as the froth comes off the very high levels of house price growth seen recently in Northern England and Wales.’