A chronic shortage of properties continues to drive house prices upwards across Britain, according to Nationwide Building Society’s latest house price index.

The building society said that prices increased by an average of 0.3% in July, which although lower than the 1.1% growth recorded in June, is higher than between March and May when there was a fall in property prices.

On an annual basis, home price growth in July was 2.9% higher than in the same month last year, which is slightly below the 3.1% annual increase seen the previous month, with the average UK property price now stood at £211,671.

Nationwide said the increase appeared to be at odds with recent signs of cooling in the housing market, but reflected the supply-demand imbalance in the market.

According to the building society, a lack of homes on the market continues to support the market, with annual house price growth remaining only just outside the 3% to 6% range that has been prevailing for most of the past two years.

“Constrained supply is likely to continue to provide support for house prices and, as a result, we continue to expect prices to rise by about 2% over 2017 as a whole,” said Robert Gardner, Nationwide’s chief economist.