There is a “window of opportunity” for first-time buyers to get on the housing ladder, according to RightMove.
According to its house price index research, the available stock of property with two-bedrooms or fewer is up 1.9 per cent on the previous year.
Meanwhile there have been fewer buy-to-let investors to compete against, with sales agreed in the two-bed or fewer sector down 13.2 per cent in December.
Miles Shipside, Rightmove director and housing market analyst, said this meant sellers are more likely to accept lower offers.
He said: “Those planning to buy their first home in 2017 have more choice of properties and less competition from other buyers than their counterparts a year ago.
“It is a possible learning point for aspiring first-time buyers that a year ago buy-to-let purchasers acted more quickly and closed deals at a faster rate, appearing not to take a Christmas break.
“Admittedly they had the financial incentive of a deadline to motivate them, but first-time buyers still have time to act and currently have the incentive of stronger negotiating power to try and mitigate the upwards trajectory of property prices.”
But he warned that prices in the smaller home sector may be inflated because of last year’s buy-to-let rush to avoid the additional stamp duty rate.
First-time buyers’ favoured target of two bedrooms or fewer has seen the biggest price increases both month-on-month (2.6 per cent) and year-on-year (6.4 per cent) of any sector.
Early 2017 saw prices increase by 0.4 per cent month-on-month – similar to the 0.5 per cent increase seen last year.
The average asking price in January is £300,245 – up 3.2 per cent on the previous year.
Matt Andrews, managing director at Bluestone, said: “A slight rise in monthly house prices in January does not indicate how the market will move in 2017.
“As it stands, house prices are still rocketing upwards annually and many are struggling to buy affordable property.
“Although some in the UK can take advantage of record low mortgage rates to help secure a home, there is still a growing and significant group of hardworking people who can't access credit as lenders deem them 'high risk' borrowers.
“Only when the lending industry begins to recognize this segment of the population as credit-worthy will we begin to see UK house prices balance out and become more obtainable to the average, hardworking person.”