House prices affected by uncertainty

Nationwide Building Society said property values fell for the first time since May, down 0.1 per cent month on month in August to an average of £210,495.

This saw the annual rate of growth fall from 2.9 per cent in July to 2.1 per cent, which was also the weakest since May, when the yearly rate hit its lowest level for four years.

Annual house price growth has more than halved over the past year, having stood at 5.6 per cent last August.

Nationwide said the slowdown was further signs of a cooling property market and wider economy and suggested the impact of soaring prices outstripping wage growth may be taking its toll.

Robert Gardner, chief economist at Nationwide, said: "It may be that mounting pressure on household finances is exerting a drag.

"Wages have been failing to keep up with the cost of living in recent months and consumer sentiment has weakened."

He added: "Ultimately, housing market developments will depend on wider economic performance.

"The UK economy slowed noticeably in the first half of the year, and there has been little to suggest a significant rebound in the months ahead."

Nationwide said housing market activity would remain "subdued", but stuck by its prediction for property prices to rise by around two per cent overall in 2017 as it said strong demand and constrained supply would continue to provide support.

Economic growth has slowed sharply in the first half of 2017, easing to 0.2 per cent in the first three months and 0.3 per cent in the second quarter.

This came as household spending slumped to its lowest level in nearly three years between April and June as consumers have been knocked by surging inflation caused by the Brexit-hit pound.

Howard Archer, chief economic adviser to the EY Item Club, said: "The fundamentals for house- buyers are likely to remain weak over the coming months with consumers' purchasing power continuing to be squeezed by inflation running higher than earnings growth."

He said recent speculation that the Bank of England may increase interest rates from the record low of 0.25 per cent over the coming year or so could also be impacting buyers.

"While any increase in interest rates would be small and mortgage rates would still be at historically very low levels, the fact that it would be the first rise in interest rates since mid-2007 could have a significant effect on housing market psychology," he said.

Nationwide's report also showed that stamp duty land tax revenues have reached all-time highs - at £12.8 billion in the year to the second quarter.

This is far higher than the £10.6 billion recorded in late 2007, despite a 30 per cent fall in the number of transactions over the past 10 years.

It comes after a 12 per cent rise in average UK house prices since 2007, while the Government has also recently introduced a three per cent levy on the purchase of second homes.