House prices increased by 0.3 per cent in September, according to the Nationwide house price index.
Data for the month revealed that annual house price growth slowed to 5.3 per cent, down from 5.6 per cent in August.
The rate of price growth in London slowed to 7.1 per cent in the three months to September, down from 9.9 per cent in the second quarter – taking it out of the top three regions in terms of price growth for the first time in seven years.
“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," said Nationwide's chief economist, Robert Gardner.
"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."
The number of new homes built in England has picked up, Gardner said, but "is still not sufficient to keep up with the expected increase in the population".
In the four quarters to the second quarter of 2016, 139,000 new houses were completed, which is 30 per cent higher than the low point seen in 2010. However, this is still around 15 per cent below the average rate of building in the five years before the financial crisis and 38 per cent below the 225,000 new households projected to form each year over the coming decade. It also falls short of the 300,000 new homes per year that the House of Lords has recommended.
“With interest rates expected to remain low and schemes, such as Help to Buy, helping to provide those with smaller deposits access to finance, housebuilders should have confidence that there will be sufficient demand from buyers if more homes are built," Gardner added.
"The major housebuilders appear to have capacity to expand output, with most reporting land banks that could support around five years’ worth of construction at current rates of building activity. However, there is a risk that the uncertain economic outlook may weigh on activity in the period ahead."
Stability in property post-Brexit vote is reassuring, said Rob Weaver, director of investments at Property Partner, but there is still cause for concern.
"We may be seeing a slowdown but house prices are still creeping upwards month on month," he continued. "The uncertainty following the EU Referendum result and a hike in stamp duty have seemingly dampened buyer enthusiasm. In our experience September has not seen the normal pickup in activity after the summer recess, as we suspect buyers and investors have merely delayed rather than cancelled their decision to buy.
"Stable house prices is really positive but the low levels of activity in the market is a continuing concern and an indication that it is still difficult to get mortgage finance despite the recent lowering of the base rate."
Ben Madden, managing director of London estate agents Thorgills, said: “The annual rate of house price growth may have nudged down but the slight uptick in September shows a resilience in the market that many did not expect post-Brexit.
"The acute supply shortage is the major pillar supporting house prices but the recent interest rate cut and the prospect of another cut to come also stimulated demand in September and complemented the usual seasonal uplift."