House prices in the UK improved over the course of the year, recovering somewhat from the significant drop in 2008.

According to Nationwide building society, house prices in the UK rose by 5.9%, showing some improvement in the housing market after significant drops in 2008.

The rise in prices in 2009 shows some recovery from the sharp 15.9% fall the UK experienced in 2008.

In December, house prices rose by 0.4%, continuing the recent upward trend in the market. The average price of a house is now £162,103.

The annual change in house prices rose from 2.7% in November to 5.9% in December.

Martin Gahbauer, Nationwide’s Chief Economist, said: “Few could have foreseen this development at the start of the year, when the near term price trend was still pointing to a repeat of the double digit annual decline experienced in 2008.

“Although house prices are still 12.2% lower than their October 2007 cyclical peak, they have now rebounded by an impressive 8.9% since their February 2009 trough.”

The UK housing market’s recovery came as a shock to some commentators, as the UK has been enduring the worst recession since the Second World War.

The lack of housing being put up for sale and slowly growing number of buyers had the effect of building up the housing market early in the year. Also, as interest rates dropped, potential buyers were attracted to the market because of improved affordability.

Despite the improvement in the housing market, Nationwide says that the future outlook remains uncertain.

Mr Gahbauer said: “There is still a significant amount of fog clouding the outlook for house prices. This year’s recovery has to some extent been driven by transitory factors and there are reasons to believe that it will lose momentum over the coming year.

“At the same time, there is no obvious catalyst on the near-term horizon that would trigger significant renewed falls in prices, such as a sharp spike in interest rates or a further pronounced tightening of credit conditions from present levels. At this stage, therefore, it seems likely that 2010 will see no significant house price movements in either direction.”