Britain’s housing market continued to push forward last month as the average house price jumped by 1.2 per cent to £199,303, according to the Department of Communities and Local Government (DCLG).

House prices recorded their sixth consecutive monthly increase as low mortgage interest rates and more affordable prices relative to the peak in 2007 combined to boost demand. The annual rate at which prices are falling has also slowed, down to 4.1 per cent in September, the lowest annual decline for 13 months.

Many economists believe that the recent house price mini-boom will turn to bust again as unemployment rises and wage growth slows.

David Buik, an analyst for BGC Partners, said: “My big concern is that we will have a measurable correction around March or April of next year. At this point, the results of rising foreclosures and unemployment mean that house prices cannot continue to rise.”

IHS Global Insight, the economic and financial data group, predicts that house prices will fall by at least 5 per cent by the end of next year.

Data out today is expected to show that unemployment increased by 65,000 in the three months to September, taking the UK’s total to 2.5 million, or 8.5 per cent.

The DCLG figures build on other positive data from Nationwide Building Society and Halifax, which recently reported 0.4 per cent and 1.2 per cent rises in house prices for last month, respectively. The figures come a day after data from the Royal Institution of Chartered Surveyors (RICS) showed that 34 per cent more estate agents had reported rising, rather than falling, prices in October. This compares with a balance of 21 per cent in September and is the highest level since December 2006. In London, the balance was 95 per cent.

Most economists have attributed recent monthly house price increases to a shortage of supply rather than to an increase in demand. However, the RICS survey indicates that sellers have begun to return to the market, with a balance of 15 per cent saying that the number of houses coming on to the market had increased last month, up from 5 per cent in September.

However, supply remains at relatively low levels compared with recent years. A RICS official said: “Although the supply of property is beginning to pick up, it is still insufficient to keep pace with the increase in demand, which points to further price gains in the near term.”

Recent house price increases helped the value of goods sold on the high street to surge at an annual rate of 3.8 per cent last month, according to figures from the British Retail Consortium. Sales of furniture and flooring were particularly robust in October.

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