Residential property price growth across Britain eased to a three-month low in August, as cooler economic conditions and political uncertainty continued to have an adverse impact on the market.
Nationwide said that the average price of a home dropped by 0.1% in August compared with a month earlier, causing the annual rate of growth to slow to 2.1% from 2.9% in July.
The housing sector has slowed sharply since the middle of last year, and this trend looks set to continue moving forward, as the rate of inflation outstrips wage growth, squeezing household budgets and thus reducing demand from prospective homebuyers.
“The moderation in price growth primarily reflects the squeeze on real wages and the slowdown in the pace that mortgage rates are falling,” said Samuel Tombs, economist at consultancy Pantheon Macroeconomics.
“Prices likely will continue to struggle to rise much, given that inflation still has further to rise, consumer confidence has deteriorated sharply since June and lenders intend to reduce the supply of unsecured credit,” he added.
In some respects the slowdown in the housing market is surprising, given the ongoing strength of the labour market, according to Nationwide’s chief economist, Robert Gardner.
He commented: “The economy created a healthy 125,000 jobs in the three months to June and the unemployment rate fell to 4.4% - the lowest rate for over forty 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.”
He added: "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."
Nationwide forecast annual growth of 2% for the market this year with constrained supply supporting prices.