House prices dipped marginally in August but remained firmly higher than a year ago, according to monthly data logged by Nationwide Building Society.
The house price index from the lender showed a 0.1% month-on-month decline to £271,079, on a seasonally adjusted basis, when it was expected to inch up 0.1% after rising 0.5% in July.
Compared to a year ago, the index was up 2.1%, following a 2.4% rise in July.
"The relatively subdued pace of house price growth is perhaps understandable, given that affordability remains stretched relative to long-term norms," says Nationwide's chief economist, Robert Gardner.
"House prices are still high compared to household incomes, making raising a deposit challenging for prospective buyers, especially given the intense cost of living pressures in recent years.
"Combined with the fact that mortgage costs are more than three times the levels prevailing in the wake of the pandemic, this means that the cost of servicing a mortgage is also a barrier for many."
He said affordability "should continue to improve gradually" if income growth continues to outpace house price growth, though the path for borrowing costs depends on the Bank of England.
Under-occupied housing
Nationwide also noted a shift in the composition of housing stock in England over the past decade, and highlighted that a larger proportion are classified as being "underoccupied".
The largest increase has been for terraced houses, where the average floor area is 3.6% bigger.
Offsetting this, the average size of a flat is now 1.7% smaller than 10 years ago at 60.3 sq m.
This shrinkage that has taken place while flats now account for a higher proportion of privately rented dwellings – rising to 42% of from 38% in 2013. In owner occupied housing, flats only account for 10% of properties now.
Semi-detached houses have grown 2.2% to an average of 99.1 sq m, while detached houses have only expanded 0.6% to 151.9%.
The owner-occupier sector has the highest average floor area at 112 sq m, while for private renters this drops to 76 sq m and for social housing drops to 65 sq m, which Nationwide said was due to a greater concentration of flats.
Almost nine out of 10 (87%) owner-occupied properties in England have at least one spare bedroom, with the research finding that 53% are classified as "underoccupied", ie with two or more spare bedrooms.
This proportion of underoccupied properties has been trending up over time, having been around 50% in 2013 and below 45% in 2003.
In the private rented sector, 16% of properties are classed as ‘underoccupied’.
"In the social rented sector, overcrowding is more of a concern," said Andrew Harvey, Nationwide's senior economist. Around 8% of properties classified as overcrowded here, with the definition being if they have fewer bedrooms available that the notional number needed according to bedroom standard definition.
Over the past decade, the total housing stock in England has increased by 2.1 million dwellings (9%) to 25.4 million, said Harvey.
Out of this total, 16.3 million or 64% are owner occupied, while 4.9 million (19%) are privately rented, with the remaining 4.2 million (16%) local authority or housing association.