According to the latest Nationwide House Price Index, a dwindling supply of homes is keeping prices stable.
The annual pace of house price growth remained broadly stable in July at 2.9%, only a touch lower than the 3.1% recorded in June.
“On the surface, this appears at odds with recent signs of cooling in the housing market,” said Robert Gardner, Nationwide’s Chief Economist, said. “The number of housing transactions dipped to their lowest level for eight months in June, while in the same month the number of mortgages approved for house purchase moderated to a nine-month low of c.65,000.
“But a lack of homes on the market appears to be providing support, with annual house price growth remaining only just outside the 3-6% range, that has been prevailing for most of the past two years.
“This pattern looks set to be maintained in the near term. Survey data point to relatively sluggish levels of new buyer enquiries, but at the same time surveyors report that relatively few properties are coming onto the market (and at a time when the number of homes on estate agents’ books is already close to thirty year lows).
“Ultimately, housing market developments will depend on wider economic performance. The UK economy slowed noticeably in the first half of the year and there has been little to suggest a significant departure from recent trends in the quarters ahead.
“While employment growth has remained relatively robust, household budgets are coming under pressure as wage growth is failing to keep up with the rising cost of living.
“This suggests that housing market activity is likely to remain subdued, with the balance in the market shifting a little further towards buyers in the quarters ahead.
“Nevertheless, constrained supply is likely to continue to provide support for house prices and, as a result, we continue to expect prices to rise by c.2% over 2017 as a whole – only modestly lower than the levels recorded in recent months.”