Higher property prices were good news for the construction industry, property owners and estate agents but increases must be “slow and steady”, a veteran economist has warned.

“A slow and steady increase as has been witnessed is good for the sector. Jumps and bumps are the worst thing that could happen because they create a bubble that can harm the economy,” Karm Farrugia said.

He was reacting to statistics published in the Central Bank’s quarterly review that showed advertised property prices going up for the first time in two years.

The president of the Federation of Estate Agents, Ian Casolani attributed the movement in the market to a number of factors including vendors responding to last year’s market conditions and reducing their prices, which then stimulated activity that has seen the market pick up this year.

“There was also a movement in the market for foreign buyers and people generally got fed up waiting,” Mr Casolani said.

He was cautiously optimistic about prospects for the rest of the year, insisting the market for apartments was still dogged by high supply, which suppressed prices.

According to the Central Bank, the advertised prices for property returned to positive territory in March.

Data showed that, in the first quarter of this year, prices increased by 4.5 per cent when compared to a year earlier, the first upward movement in 24 months. This contrasts with a decline of 1.4 per cent in the previous quarter.

Property prices started to drop in the second half of 2007 and took a sharp downturn between December 2008 and March 2009, as the global recession bit deep. Since then, they have continued to fall but at a slower pace and the market started to show signs of stabilising.

The Central Bank’s data, compiled from advertised prices, show that apartments, which constitute half of the properties in the Bank’s sample, saw prices rising by 4.2 per cent on a year earlier. In the same period, luxurious houses, which make up a fifth of the sample, sawa substantial jump of 21.4 per cent.

In contrast, prices of maison-ettes were broadly stable while those of terraced houses dropped slightly.

However, the property market may not be the appropriate barometer to measure economic recovery with Mr Farrugia insisting the upward movement in the sector was of little importance in this regard.

“From an economic perspective the change is good but not sensational because the recession was not caused by a crash in the property market. In this respect, it is not as important for the economy as much as exports are,” Mr Farrugia said.

With the quarterly review confirming economic growth of 3.4 per cent in the first quarter and the Central Bank forecasting annual growth of 1.5 per cent, Mr Farrugia said the statistics confirmed the economy was on the mend.