UK house prices are likely to continue to rise in 2017 as building lags demand for homes, the Halifax has warned.

The average price of a property in the UK fell by 0.9% in January, which was the first monthly fall since August, but remains 5.7% higher than a year ago, the mortgage lender said.

The latest change in values mean that the average price of a residential property in Britain is now £220,260, but with demand for housing likely to remain strong through the coming year, prices look set to rise further moving forward, although growth will be hampered by weaker economic growth and an expected drop in spending power.

“UK house prices continue to be supported by an ongoing shortage of property for sale, low levels of housebuilding, and exceptionally low interest rates,” said Martin Ellis, housing economist at Halifax.

“These factors are unlikely to change materially during 2017. Nonetheless, weaker economic growth and increasing pressure on spending power, along with affordability constraints, are expected to dampen housing demand, resulting in some downward pressure on annual house price growth during the year.”

The founder and CEO of eMoov.co.uk, Russell Quirk, believes that some people will view last month’s dip in house prices as “a fulfilment of the Armageddon style prophecies that have plagued the UK market since the start of last year”, with many widely predicting a troublesome year ahead for property.

But that these figures demonstrate the “robust, Teflon style nature of the UK market”, according to Quirk, as, despite a turbulent year for property, it has weathered the storm and continues to see upward price growth both annually and when compared to the last quarter.

He continued: “January is always a lethargic month for UK property as a result of the Christmas break and so any fall in house prices at this time of year should be taken with a pinch of salt, rather than a handful of panic.

“Mortgage approvals have continued to increase and demand remains woefully low, so it is likely that come this time next month, prices will be on the up again across the board and this monthly drop will have righted itself.

“Had any other market around the world been subject to such a sustained period of scaremongering and uncertainty amongst buyer and seller as the UK market has in the last year, I expect it would be a different story to the one we are seeing here.” 

The ongoing supply-demand imbalance in the market will continue to frustrate anyone looking to buy anytime soon as it will make affording that first step onto the housing ladder even harder.

Hannah Maundrell, editor in chief of money.co.uk, said: “Usually you can rely on house prices slowing down in the winter months but this doesn’t seem to be the case, even with the Brexit backdrop.

“At the moment trying to buy your first place can feel like you’re banging your head against a brick wall – just not one you actually can afford to own. There is hope that an influx of ex-buy-to-let properties could flood onto the market in spring as the landlord tax crackdown takes effect. Whether or not this will help the situation remains to be seen.”

Jonathan Hopper, managing director of Garrington Property Finders, is among those that believe UK house prices will rise in 2017, “albeit at a more subdued pace as house price-to-earnings ratios begin to bite in many parts of the country”.

Ian Thomas, CIO and co-founder of LendInvest, also expects to see home prices increase further, but believes that the “scale of price growth” will ultimately be determined by “measures in the government’s housing white paper” and whether they can “tackle the gridlock in supply”.