House prices are now 8.7 percent lower than a year ago, compared to 9.6 percent lower in May. Hometrack's non-seasonally adjusted monthly figures have shown house prices static for the past two months, possibly benefiting from a seasonal rise in demand.

The percentage of their asking price which sellers achieved rose to 91.0 percent from 90.3 percent, its highest in a year, and the number of sales agreed and potential buyers also rose, though more slowly than in May.

"A lack of supply and rising demand have combined to prop up house prices in the last two months. Over the last six months, the volume of buyers has grown by 36 percent, this compared to a 6.4 percent increase in the number of homes for sale," said Richard Donnell, director of research at Hometrack.

But overall transaction levels and the number of new homes coming on to the market are still well below average, with new property listings up just 0.8 percent on the month after a 0.2 percent decline in May.

Surveys by the major mortgage lenders Halifax and Nationwide show overall house prices are around 15-20 percent lower than their peak in the second half of 2007.

Donnell said it was unclear if the increased sales momentum would last through the year, when seasonal demand tends to fall.

"Given the uncertain outlook for the economy it is the demand side where the greatest risk lies as many would-be buyers continue to remain cautious or are unable to obtain sufficient equity or finance to access the market," Donnell said.

(Reporting by David Milliken; Editing by Victoria Main)