BRITAIN'S biggest building society claims it is too early to predict what impact the US terrorist attacks will have on the property market despite sharp increases in house prices during September.

Nationwide said house prices rose by 2.8 per cent last month, the highest monthly increase since June 1993.

The jump put annual house price inflation for the year to the end of September at 14.6 per cent, and increased the average price of a property to £92,432.

But the society said, despite the strong gains, it was leaving its forecast for house price growth for 2001 unchanged at 11 per cent due to the high degree of uncertainty following the terrorist strikes.

Alex Bannister, Nationwide's group economist, said: "The tragic events in the US on September 11 will have an impact on the housing market, but much depends on the outlook for the US economy and its impact on economies across the world, including the UK.

"It is possible that the housing market may slow more quickly and recover more slowly than we originally envisaged, but in reality it is too early to forecast with any confidence."

Nationwide said that while events in the US had increased the risk of recession there, the key issue was whether US consumers remained confident enough to keep the economy going. The society said a recession in the US would knock prospects for the UK economy and housing market, with London feeling the impact first and most significantly.

But it said that, while house price growth in London was likely to reduce sharply, it would be some time before the slowdown was seen, as people were likely to continue moving money away from equities into safer investments such as property.

Mr Bannister said previous military conflicts had not had much impact on the housing market unless they radically altered economic conditions, and the Falklands, Gulf War and Bosnia all had little direct influence on the market.

Nationwide said house price growth had increased in the North in the second half of the year. In the North-East, annual price inflation jumped to 13 per cent at the end of September, compared to just one per cent at the end of the second quarter, while annual increases rose to 14.1 per cent in the North West and 11.6 per cent in Yorkshire and Humberside.