The price of newly marketed property has reached a virtual standstill as affordability constraints put the brakes on spending.
The latest Rightmove House Price Index reveals prices rose by just 0.1 per cent in July, despite strong demand for properties and a lack of suitable supply.
It was a stronger performance than the previous month, which witnessed a fall of 0.4 per cent, and a significant improvement on the 0.9 per cent fall that came in the wake of the EU referendum result in July 2016.
More than 45 per cent of agents’ property stock was sold subject to contract - the highest proportion ever recorded by Rightmove since it began monitoring the trend seven years ago.
The number of sales agreed rose by 4.6 per cent in June 2017 compared to June 2016, putting the year-to-date figure almost on a par with last year, when activity was boosted by the rush to beat the stamp duty deadline.
But with consumers facing rising inflation and slower wage growth, there were signs that some properties had hit their price ceiling.
Miles Shipside, Rightmove director and housing market analyst, said: “Wage growth is muted, there are signs that consumer credit is tightening, and at some point there will be the first rise in mortgage interest rates for a decade or more, which will come as a shock to buyers who have either forgotten or have never experienced interest rates going up as well as down.
“We can see now that price rises are muted despite high housing demand, indicating we have left the stage of the cycle where price rises exceed the rate of inflation. High demand will continue to underpin prices, but we are seeing stretched affordability limiting the pace of rises, especially in the south of the country.”
Jeremy Duncombe, director, Legal & General Mortgage Club, added: “Today’s figures mirror the slowing of house price growth that we saw in the recent RICS survey, but activity in the mortgage market remains strong - and the property market outside of London and the south east continues to show healthy growth.
“In the north, Manchester, Leeds and Birmingham continue to enjoy strong performance, whilst across the country, first-time buyers have also doubled in number from the market low of 2009.
“However, the ongoing lack of housing supply remains a fundamental issue. It’s time for the government to address the housing crisis by building thousands more affordable homes to help more young adults across the country make their first step on the property ladder.”