House prices unexpectedly climbed in December for the first time in seven months, according to a leading index, leaving them almost unchanged across the year as a whole and dampening fears for a dramatic crash.
The average property price rose 0.4pc month-on-month to £162,763, mortgage lender Nationwide reported, reversing the 0.3pc drop seen in November.
The upswing did not lift the annual rate of change above the 0.4pc rise reported for the previous month. Prices climbed on average just £660 over the last 12 months.
That meant they ended the year "essentially flat", after the gains seen in the first half were wiped out in the last six months as supply increasingly outstripped demand, Nationwide said.
The lender thought the abolition of Home Information Packs (HIPs) following the election could have triggered the flood of property on to the market, as the removal of the extra cost stopped putting off speculative sellers.
Nationwide cautioned that the latest surprise monthly rise, while welcome, did not mark an end to the market's underlying downwards trend.
"Despite December's increase, house prices have fallen in four out of the last six months and it would be premature to suggest that the recent downward trend has been broken on the basis of one month's figures," Martin Gahbauer, Nationwide's chief economist, said.
The three month on three month rate of change, which smoothes out volatility to provide a better picture of market trends, pointed to a continued fall in prices. However, the rate of decline improved from minus 1.3pc in November to minus 1pc in December, rather than accelerating alarmingly.
"The December figures do underscore the fact the current downtrend is only very modest, particularly when seen in comparison to the second half of 2008," said Mr Gahbauer.
Across the fourth quarter as a whole, Nationwide reported prices fell in 10 out of 13 UK regions.
East Anglia saw the biggest improvement, with prices rising 1.6pc over the three months, while Northern Ireland was the region suffering the largest drop, as prices fell 3.4pc.
Looking ahead, Nationwide sees little chance of a strong recovery in demand.
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