Nationwide’s latest house price review reveals that house prices have risen for the third month in a row.

House prices rose by 1.3% in July, leading the UK’s largest building society Nationwide to believe that home prices could end the year higher than they started in 2009.

The latest Nationwide house price survey has reported that the average house price has risen by 1.3% in the last month, making the three month rate of change 2.6% – the highest it has been since February 2007.

Despite house prices still being 6.2% lower than they were one year ago, the year-on-year decline has improved significantly from the 9.3% in June 2009.

The average UK house now costs £158,871 compared to £156,442 in June.

Martin Gahbauer, Chief Economist at Nationwide, said: “For the first seven months of 2009 as a whole, prices have risen by a cumulative 1.3%, suggesting there is now a reasonable chance that prices could end the year slightly higher than where they started.

“House prices have been remarkably resilient so far this year, despite a recessionary economic background with sharply rising unemployment.”

According to Nationwide, the effect of the recession on the housing market has not been as severe as first predicted. Activity and demand has risen in light of low interest rates and tentative signs of market stabilisation, but the number of properties up for sale remains relatively low boosting the prices of houses on offer.

However, Mr Gahbauer warned that the rise could not continue like this as it would then be out of line with earnings and rents. The rising unemployment in this country also has a significant impact on buyer confidence so the price increases are unlikely to be sustained for very long.

He added: “One of the factors helping prices to stabilise in 2009 is the shortage of properties available for sale.”

An estimated 100,000 new homes will have been built by the end of 2009, the lowest level since records began. This potentially points to a housing shortfall over the next few years, which Mr Gahbauer states could be “detrimental to housing affordability and can contribute to future instability in prices.”