House prices grew on a monthly basis for the first time in two months as average prices reached £211,671 in July, Nationwide says.
The latest Nationwide House Price Index shows prices were up 0.3% on a monthly basis, reversing falls of 0.2% in May and 0.1% in June.
The figures were also up 2.9% annually, which is a slight dip on the 3.1% growth recorded in June.
Robert Gardner, chief economist for Nationwide, said: “Ultimately, housing market developments will depend on wider economic performance.
“The UK economy slowed noticeably in the first half of the year and there has been little to suggest a significant departure from recent trends in the quarters ahead.
“While employment growth has remained relatively robust, household budgets are coming under pressure as wage growth is failing to keep up with the rising cost of living.
“This suggests that housing market activity is likely to remain subdued, with the balance in the market shifting a little further towards buyers in the quarters ahead.
“Nevertheless, constrained supply is likely to continue to provide support for house prices and, as a result, we continue to expect prices to rise by around 2% over 2017 as a whole – only modestly lower than the levels recorded in recent months.”
Lucy Pendleton, director of estate agents James Pendleton, said: “Market conditions just beneath the surface are keeping this ball in the air despite much talk recently of the market starting to roll over.
“The big question is where is support for house price growth coming from?
“Supply and demand is always a supportive factor but this kind of market behaviour shows just how imbalanced it has become. Prices seem to be finding any excuse to hold their ground and exploiting it.
“The cause has to be lack of supply, placing a squeeze on the number of homes coming to market, helped in June by mortgage approvals slumping to a nine-month low with transactions levels also depressed.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, agreed that supply was an issue.
He said: “Although these figures on the face of it look quite encouraging when one considers the fall in transactions, it is clear that prices are being supported by a lack of property on the market.
“We would have expected transactions in particular to be higher compared with last year bearing in mind how much quieter the market was 12 months ago following the introduction of the stamp duty surcharge.
“On the plus side, activity could be much lower considering current political uncertainty and fortunately there does seem an enthusiasm among serious buyers and sellers to get on with the job in hand.
“The current climate is also providing an opportunity for first-time buyers at least to better compete for smaller properties.”