The annual rate of property price growth dropped to a two-year low in June, revealed Nationwide.
The building society found that annual house price inflation fell to 3.3% last month from 4.6% in May. A year ago, prices were increasing by 11.8%.
Property prices in Wales and Scotland have even fallen in the past year, according to Nationwide.
Between May and June, prices around the UK decreased by 0.2%, making the average UK house price now £195,055.
Nationwide’s Chief Economist, Robert Gardner, says: “House price growth continues to outpace earnings, but the gap is closing, helped by a pick-up in annual wage growth, which moved up to 2.7% in the three months to April from 1.9% at the start of the year.
“The slowdown in house price growth is not confined to, nor does it appear to be driven primarily by, developments in London.”1
Last month, a study by LSL Property Services revealed that prices in parts of central London have declined by up to 22% since last autumn.
Some economists did not expect house price inflation to drop so continuously.
Chief UK and European Economist at IHS Global Insight, Howard Archer, comments: “While we are slightly surprised by June’s dip in house prices, it does not fundamentally change our view that house prices are likely to be firmer over the second half of the year.”1
Archer still predicts price rises of 6% this year and 5% next year.
Capital Economics’ Matthew Pointon says the monthly price drop does not mean the market is cooling: “On an underlying basis, prices are still rising, and with active housing demand finally recovering, annual house price gains have bottomed out.”1
Regionally, the area with the fastest price growth is now Northern Ireland, with increases of 8% over the year between the second quarter (Q2) of 2014 and Q2 2015, found Nationwide.
In London, prices rose by 7.3%.
In Scotland, prices dropped by 1% in 12 months and Wales experienced price decreases of 0.8%.
Regional house price changes between Q2 2014-Q2 2015
| Region | Annual change | Average price |
| Northern Ireland | 8% | £126,525 |
| London | 7.3% | £429,711 |
| Outer London | 6.8% | £315, 620 |
| South East | 6% | £244,119 |
| East Anglia | 5.2% | £198,826 |
| East Midlands | 4.1% | £160,482 |
| South West | 3.8% | £215,363 |
| West Midlands | 3.4% | £165,873 |
| Yorkshire and the Humber | 3.3% | £147,387 |
| North West | 1.4% | £146,908 |
| North | 0.1% | £125,189 |
| Wales | -0.8% | £144,701 |
| Scotland | -1% | £140,512 |
However, within these regions, there were large variations between prices in individual cities.
In property hotspots, Reading saw prices rise 13%, Oxford experienced price growth of 12% and in Edinburgh, prices increased by 11%.
Prices fell in areas including Sunderland, at 4% and Nottingham, the Highlands and Islands, and West Yorkshire at 2%.