House price gains in the UK appeared to pick up in July after falls in the preceding two months, data from HBOS subsidiary Halifax showed yesterday.

It said the average UK house price rose 0.2 per cent from June for an annual increase of 8.8 per cent and that the average house price now stands at £177,020.

However, the gains were lower than expected. A poll of analysts had predicted gains of 0.6 per cent and 9.0 per cent respectively.

Halifax said the annual rate of house price inflation was flattered by weak figures last year.

Additionally, the strengthening UK economy and improved buyer confidence gave the housing market more momentum than previously expected in the first half of 2006, it added.

It also said it has increased forecasts for house price growth this year to five per cent from three per cent. The new forecast is below the long-term average of eight per cent, but is in line with the reported increase in 2005.

Halifax added that sound fundamentals, underpinned by a strengthening economy, high employment levels and low interest rates, will continue to support housing demand in the second half of 2006.

The annual rate of house price inflation, however, is expected to ease, partly because the corresponding figures last year were strong.

That aside, pressure from higher utility bills and council tax rises along with speculation of higher interest rates are also likely to moderate demand, causing house price inflation to decline, it added.

Martin Ellis, chief economist at Halifax, said: "House prices increased by 0.2 per cent in July following successive declines in May and June. This mixed pattern of monthly price rises and falls is a typical feature of a more stable housing market.

"Overall, house prices have increased by only 0.9 per cent in the past four months compared with a 3.3 per cent rise in the preceding four months," he added.

Earlier this week, the equivalent survey from the country's biggest building society came in strong.

In its monthly survey, the Nationwide said house prices rose by 0.8 per cent in July from June.

On a year-on-year basis, prices rose by 5.9 per cent, the biggest annual gain since April 2005.