British house prices rose this month at the slowest annual pace in more than two years, according to mortgage lender Nationwide, although it warned theslowdown might not persist unless house-building picks up significantly.
House prices rose 3.2 per cent year-on-year in August, the weakest annual rate since June 2013, compared with a 3.5 per cent rise in July.
Economists polled by Reuters had expected the rate of growth would fall to 3.1 per cent this month.
On a monthly basis, house prices rose 0.3 per cent, in line with expectations and down slightly from a 0.4 per cent increase in July.
Nationwide said the figures were further evidence that annual house price growth may be stabilising close to the pace of earnings growth, with regular pay excluding bonuses at just under three per cent during the second quarter.
“However, survey evidence cautions that this trend may not be maintained unless construction activity accelerates,” said Robert Gardner, chief economist at Nationwide. “Surveyors reported the lowest ever number of properties on their books in July – on data extending back to the late 1970s – while new buyer enquiries picked up.”
Gardner added that a significant increase in construction activity would be needed to avoid affordability becoming further stretched in theyears ahead.
The government last month announced a plan to remove obstacles to building new houses after it helped cause a surge in house prices in 2013 by backing subsidies for people trying to get on the property ladder.
Data from rival mortgage lender Halifax has pointed to a stronger pace of annual house price growth, although it too has slowed recently.
But there have been signs activity is picking up, after the introduction of tougher rules on lending slowed the market through most of 2014.
The British Bankers’ Association said mortgage approvals rose in July to their highest level since February 2014. Official figures from the Bank of England also show mortgage approvals have risen in most months this year.
BOE deputy governor Ben Broadbent said earlier this month he didn’t view the housing market “with great alarm”.
A Reuters poll of economists on Wednesday suggested house price growth is likely to slow next year.