Prices rose by 0.5% in November meaning the average house price rose to £162,764 in November. Prices have now risen by an average of 2.7% over the last 12 months.

The average house price is now at a similar level to where it was in early 2006. This suggests that house prices are now rising at a more moderate pace than in the spring and summer months, when they experienced a very strong bounce from the early 2009 lows.

Martin Gahbauer, chief economist at Nationwide, said that the labour market has held up better than expected and has yet to have a significant impact on the housing market.

He said: “The outlook for the housing market remains crucially dependent on labour market conditions, and here recent developments have been somewhat more encouraging than might have been expected.”

Gahbauer added that mortgage rates have fallen sharply as a result of base rate cuts which meant that far fewer borrowers have fallen into arrears than would normally be the case in such a deep recession.

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He said: “In fact, the percentage of borrowers in arrears across the mortgage industry has even edged down slightly in the most recent quarterly figures. As such, the downward pressure on house prices from distressed sales has so far been significantly lower than expected.”

Catherine Penman, head of research at consultancty firm Carter Jonas, said the index has added to the growing feel-good factor around the property market, adding that prices are likely to remain stable in 2010.

She said: “House prices continue to defy the odds given the uncertain economic environment. Two factors have been responsible for the increase in house prices during 2009. Earlier in the year, the driver was affordability, as properties and mortgage finance were available at historically very low price levels, thus stimulating demand. From the summer onwards, the rebound in prices has been more supply than demand-driven, a result of the sheer lack of stock.

Penman concluded:”Despite improving economic data and sentiment, prices are likely to remain stable in 2010, especially prior to the general election, when caution will remain the watchword.”