House prices drop to average £210,495 in August but values still set to rise

The annual increase was 2.1 per cent in August down from 2.9 per cent in July, according to Britain’s biggest building society.

The Nationwide said the pattern was “consistent with signs of cooling in the housing market and the wider economy”.

On a monthly basis, house prices fell by 0.1 per cent between July and August to reach an average of £210,495.

Robert Gardner, chief economist at Nationwide, said: “In some respects the slowdown in the housing market is surprising, given the ongoing strength of the labour market.

“The economy created a healthy 125,000 jobs in the three months to June and the unemployment rate fell to 4.4 per cent — the lowest rate for more than 40 years. 

“In addition, mortgage rates have remained close to all-time lows.

“It may be that mounting pressure on household finances is exerting a drag. Wages have been failing to keep up with the cost of living in recent months and consumer sentiment has weakened. 

“While measures of housing affordability are not particularly stretched at a UK level, pressures are evident in some regions – especially London and the South of England.

“While employment growth has remained robust, household budgets are under pressure. This suggests that housing market activity will remain subdued.

“Nevertheless, constrained supply is likely to continue to provide support for house prices. 

“The stock of homes on estate agents’ books remains close to 30-year lows and the number of new homes coming onto the market remains subdued. 

“As a result, we continue to expect prices to rise by around two per cent over 2017 as a whole.”

Twelve months ago house prices were rising at an annual rate of 5.6 per cent.

However, economic uncertainty, higher stamp duty costs and tougher mortgage regulations are prompting homeowners to stay put.

The latest transaction figures show that the number of homes sold in the year to June 2017 was 30 per cent below that recorded in the same period of 2007. 

Mortgage approvals slipped to a nine-month low in June, while new buyer inquiries have fallen sharply in recent months, according to the Royal Institution of Chartered Surveyors. 

The economy expanded by only 0.3 per cent in the second quarter of this year, while consumer spending grew by 0.1 per cent in the three months to June, the weakest quarter since the end of 2014.