House prices bounced back to growth in June after three months of falls despite the “unusually uncertain” economic outlook amid Brexit talks, new figures show.
Prices rose by 1.1% month-on-month having fallen by 0.2% in May according to the latest Nationwide house price index.
The annual rate of growth was 3.1%, up from 2.1%.
But it was unclear whether the upturn was driven by strengthening demand, thanks to higher employment and low mortgage costs, or if the shortage of homes on the market was a more important factor.
Robert Gardner, Nationwide’s chief economist, warned the monthly figures could be volatile and that an emerging squeeze on household incomes did appear “to be exerting a drag on housing market activity in recent months”.
He added: “Given the ongoing uncertainties around the UK’s future trading arrangements, the economic outlook remains unusually uncertain, and housing market trends will depend crucially on developments in the wider economy.
“Nevertheless, in our view, household spending is likely to slow in the quarters ahead, along with the wider economy, as rising inflation squeezes household budgets.
“This, together with ongoing housing affordability pressures in key parts of the country, is likely to exert a drag on housing market activity and house price growth in the quarters ahead.
“However, the subdued level of building activity and the shortage of properties on the market are likely to provide support for prices.”
The figures also showed a shift in house price trends, with growth in the south of England slowing to similar levels seen in the rest of the country.
Annual house price growth in London, at 1.2%, was the weakest in the capital since 2012.
The Nationwide figures come after the latest data from the British Bankers’ Association showed the number of mortgage approvals was continuing to fall.