Residential property prices in the UK increased by +5.9% in 2009 after they rose by a further +0.4% in December giving an average house price of £162,103, according to the Nationwide Building Society.

This was a slight decrease on November as average house prices were £162,764.

Martin Gahbauer , Nationwides chief economist, said: “With house purchase transactions having fallen by -65% between their January 2007 peak and their November 2008 low, a significant amount of pent-up demand had begun to build up in the housing market at the start of 2009. As interest rates hit record lows, those potential buyers with enough cash to circumvent tight credit conditions re-entered the market, leading to a steady pick-up in housing transactions throughout the year.

“The re-entry of cash rich buyers into the market coincided with an extremely low supply of property available for sale, as low interest rates limited the number of distressed sales and a significant number of home movers decided to offer their properties for rent rather than sale. This restriction in supply meant that even a relatively modest pick-up in demand was able to put upward pressure on house prices.”

House prices however are still -12.2% below their peak of October 2007, but they have rebounded by +8.9%, according to Nationwide.