LONDON (Reuters) - British house prices rose last month after a fall in June and appear to be stabilising at close to the long-term pace of earnings growth which could encourage more home-building, mortgage lender Nationwide said on Tuesday.
Nationwide said house prices rose by 0.4 percent on the month in July - in line with economists' forecasts and compared with a fall of 0.2 percent the previous month.
That pushed the annual rate of growth to 3.5 percent from 3.3 percent in June.
"After moderating over the past 12 months, there are tentative signs that annual house price growth may be stabilising close to the pace of earnings growth, which has historically been around 4 percent," Nationwide economist Robert Gardner said.
Other measures of house prices have suggested that Britain's housing market is picking up again after slowing in 2014 when new rules on mortgage lending were introduced.
Chancellor George Osborne has said he wants to tackle a shortage of housing -- one of the factors that have pushed prices to record highs and out of reach of many households -- by making it easier to build new homes on land formerly used for industrial and commercial purposes.
Gardner of Nationwide said it remained unclear whether
enough new homes could be built to catch up with demand.
"The number of new homes under construction has started to pick up, albeit from historically low levels, and further increases are required if a sustainable recovery in the housing market is to be maintained over the longer term," he said.