In July annual price growth was 7.8%, although in June growth was higher at 9.6%.
Quarterly growth stood at 3.0% in the three months to August, up from July’s 2.5% but below June’s 3.3%.
Stephen Smith, director, Legal & General Mortgage Club & Housing, said: “This imbalance is causing houses prices to climb in months that typically see less activity in the market. This trend is likely to continue in the long-term unless more houses are built so that there are enough homes available for people to buy.
“The country needs to develop a long-term solution to this issue to stop house price growth from exceeding inflation and earnings growth. The longer this continues, the more people it will push out of the market.
“In essence, we need to add more cards to the deck if we are to re-shuffle housing stock and enable people to own their desired home. In order for this to happen, housebuilders must ensure that they build houses strategically, by building homes of the right size and in the right places.
“This would help existing homeowners, such as last-time buyers, who wish to move but are faced with a lack of suitable alternatives. In doing this, the country would not only stimulate supply, but also encourage more efficient use of current housing stock.”
Halifax said the stock of homes fell to a new record low in July.
Martin Ellis, Halifax housing economist, added: "The underlying pace of house price growth is strong. The shortage of secondhand properties for sale on the market is resulting in upward pressure on house prices.
“At the same time, economic recovery, real earnings growth and very low mortgage rates are supporting housing demand. Strengthening demand and highly constrained supply are likely to mean that house price growth continues to be robust in the short-term.”
