A chronic lack of homes for sale and historically low mortgage borrowing costs will continue to push UK house prices even higher, the Nationwide has warned.

The number of homes coming on to the market continues to decline, even while new enquiries from buyers increase, as reported by the National Association of Estate Agents, and this supply-demand imbalance looks set to support home prices moving forward.

The latest House Price Index released by Nationwide yesterday revealed that home prices edged up marginally in February after hitting a 14-month low the previous month.

The average price of a residential property increased by 4.5% in February, slightly up from the 4.3% recorded in January.

On a monthly basis home prices rose 0.6% to £205,846, up from £205,240 in January.

Reflecting on the data, Robert Gardner, Nationwide’s chief economist, said: “The outlook is uncertain, but we, along with most other forecasters, expect the UK economy to slow through 2017 as heightened uncertainty weighs on business investment and hiring. Consumer spending, a key engine of growth in recent quarters, is also likely to be impacted by rising inflation in the months ahead as a result of the weaker pound.

“Nevertheless, in our view a small rise in house prices of around 2% is more likely than a decline over the course of 2017, since low borrowing costs and the dearth of homes on the market will continue to support prices.”

Howard Archer, chief economist at IHS Global Insight, is among those who believe that housing market activity and prices will come under increasing pressure over the coming months from “deteriorating consumer fundamentals and weaker confidence”, but still forecasts that property prices will grow by around 3% in 2017.

Pantheon Macroeconomics estimate that property prices will rise by about 2% this year, while a Reuters poll of more than 30 property market economists and analysts published last month forecast growth in home prices of 2.5% in 2017, 2.3% next year and 3% in 2019.