On a monthly basis prices fell by 0.5%, the sharpest monthly reduction since July 2012.
Annual house price growth fell to 2.0% in August from 2.5% in July, Nationwide’s House Price Index has found.
On a monthly basis prices fell by 0.5%, the sharpest monthly reduction since July 2012.
Robert Gardner, chief economist at Nationwide, said: “Annual house price growth remains within the fairly narrow range of c2-3% which has prevailed over the past 12 months, suggesting little change in the balance between demand and supply in the market.
“Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates.
“Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on house price growth and market activity this year, though borrowing costs are likely to remain low.
“Overall, we continue to expect house prices to rise by around 1% over the course of 2018.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, was upbeat despite the reduction.
He said: “The widely-respected Nationwide figures confirm much of what we have seen on the ground over the last month or so - in other words a market softening a little further in view of the slowing demand over the summer, which was to be expected.
“However, we are seeing no signs of any major changes and in fact over the last few weeks have seen more interest in property again which could well transfer into an increase in sales agreed during September and October.”
But Jonathan Samuels, chief executive of Octane Capital, raised concerns about uncertainty in the market.
He said: "While September could well see price growth turn positive once again, the rest of 2018 is shaping up to be uneventful at best.
"There is a blanket of covering the UK property market at present.
"While the employment market remains strong, stubbornly high inflation, the potential for another rate rise, overstretched household finances and the growing possibility of a no-deal Brexit are seeding serious doubt in the minds of prospective buyers.
"A Brexit no-deal could hit prices in the capital, especially at the higher end, like a sledgehammer."
He added: "You can't help but think the government is boxing itself into a corner on Help to Buy.
"Help to Buy is certainly enabling many more people to get onto the property ladder but serious question marks remain over the longer term impact of what is an artificial stimulus."
Andy Soloman, chief executive of live chat specialist Yomdel, speculated whether price growth will pick up or if Brexit will keep things subdued.
He said: “Despite a mix of seasonal factors bringing an uplift to the wider economy, the UK housing market is yet to feel the benefit as price growth again shows a decline.
“When this positive sentiment does finally trickle down to the UK’s home buyers and sellers a continued imbalance of stock available to meet current demand should see price growth pick up in the short-term.
“However, with more interest rates increases on the way at some point down the line and the final Brexit deal still to be negotiated, any positive outlook could soon be overshadowed by darker clouds.
“There is a very good chance that once this European storm front rolls in, the market will once again begin to freeze over until a more stable outcome can provide brighter forecasts for the year ahead.”
