UK house price inflation was 5 per cent in the year to August 2017, taking the average residential property price to £225,956.
The Office for National Statistics (ONS) data showed the annual rate of house price inflation slowed slightly from the 5.1 per cent increase recorded the previous month.
Meanwhile the monthly rate of inflation slowed from 1.1 per cent in July to 0.5 per cent in August.
The north west saw the strongest growth (6.5 per cent), followed by the south west, east of England and the East Midlands (6.4 per cent).
London witnessed the lowest growth rate, with prices increasing by 2.6 per cent over the year.
Recent data has shown demand remaining relatively flat in the housing market, with price increases driven by an ongoing supply shortage.
The Royal Institution of Chartered Surveyors's August residential market survey reported that headline price expectations remained subdued in the near term, while buyer enquiries were flat.
It comes as the rate of inflation measured by the consumer prices index rose to a five-year high of 3 per cent, continuing a squeeze on living standards.
A rise in the general level of inflation increases the probability of a base rate rise at the next meeting of the Bank of England’s (BoE) monetary policy committee next month.
Several lenders have already begun raising their interest rates in anticipation of BoE rate hike.
Jeremy Duncombe, director of Legal & General Mortgage Club, said: “Annual prices are consistently rising as more buyers chase fewer properties. Escalated by a critical a lack of housing stock, this trend is only set to continue if more affordable housing is not built.
“As speculation around the Autumn Budget begins to build up, we hope there will be a genuine answer to boost supply that gives everyone a realistic the chance to own a home.”
Jeff Knight, director of marketing for Foundation Home Loans, said: "House prices are just one part of the housing market puzzle, and another rise in prices is not reflective of a buoyant market. There appears to be areas of the country where there is more activity than others, most likely driven by greater levels of affordability.
"A rise in interest rates will place great strain on this affordability – despite the fact they will still be at an unprecedented low.
"We need more housing - and affordable housing – but delivering that has clearly been a challenge for a long time and we are seeing the consequences today."
simon.allin@ft.com
