Annual house price growth in the UK slowed down in September, according to the latest figures from mortgage lender Nationwide.
Across England, Scotland, Wales and Northern Ireland house prices rose by 5.3% year-on-year, compared with 5.6% in August.
Between August and September prices increased by just 0.3%, half the 0.6% rise in the previous month.
The average price of a house or flat in the UK is now £206,015.
Nationwide economist Robert Gardner noted that although demand for homes has fallen, there are fewer properties coming on to the market.
“The relative stability in the rate of house price growth suggests that the softening in housing demand evident in recent months has been broadly matched on the supply side of the market,” Gardner explained. “Survey data indicates that, while new buyer enquiries have remained fairly subdued, the number of homes on the market has remained close to all-time lows, in part due to low rates of construction activity.”
Gardner stressed that more homes are needed to meet the demand.
“The number of new homes built in England has picked up, but is still not sufficient to keep up with the expected increase in the population,” he said. “In the four quarters to Q2 2016, 139,000 new houses were completed, 30% higher than the low point seen in 2010. However, this is still around 15% below the average rate of building in the five years before the financial crisis and 38% below the 225,000 new households projected to form each year over the coming decade.”
Housebuilders have plenty of sites where they could begin construction, and they should have more confidence that people will want to buy any homes they build, Gardner added.
In response, the industry said there had already been a huge increase in supply and builders are preparing to deliver even more homes.
“Housebuilders have massively increased output over the past few years and continue to recruit the people and buy the land necessary to deliver even more desperately needed homes,” Stewart Baseley, executive chairman of the Home Builders Federation (HBF), told the BBC.
“Reversing decades of under supply requires government to continue to implement pro-development policies and lenders to ensure buyers can get a mortgage,” Baseley said.