House prices increased at the slowest annual rate for nearly two years in August as the market finally begins to look like it is stabalising, according to the Nationwide Building Society.
Property values rose by 3.2% when compared with to August last year. This is down from 3.5% in July and the slowest annual growth since June 2013.
Nationwide said prices across the UK rose by 0.3% month-by-month in August with the average property now valued at £195,279.
Nationwide said the slowdown in annual house price growth provides further indications that market may be stabilising close to the level of earnings growth in the UK, which has historically settled at around 4%.
However a lack of properties continues to plague the market and Robert Gardner, Nationwide’s chief economist, Warned that more needs to be done to meet demand.
He said: “With UK house building running well below the expected rate of household formation in recent years and with demand for homes rising, a significant increase in construction activity is required if affordability is not to become stretched in the years ahead.”
Nationwide said there were worrying signs that supply is far from meeting demand, with surveyors reporting the lowest number of properties on their books since records began in the 1970s.
Despite house price growth easing in recent months, Nationwide said the UK property market had proved “remarkably resilient”.
Garner said: “The strength of the UK labour market in recent years is a key reason why house prices have recovered more quickly.
“Supply side developments also play an important role in explaining the divergence in house price performance.
“The UK experienced a much smaller increase in building activity in the run up to the financial crisis. As a result, there was much less of an overhang of unsold properties to be worked off in recent years.”