London was the weakest performing region, with house prices down 0.5 per cent year-on-year
Significant differences in regional affordability were found but saving for a deposit remains challenging for most.
Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said: “Annual house price growth ended the year at 2.6 per cent, within the 2-4 per cent range that prevailed throughout 2017. This was in line with our expectations and broadly consistent with the 3-4% annual rate of increase we expect to prevail over the long term (which is also our estimate for earnings growth in the long run).
“However, this marked a modest slowdown from the 4-6 per cent rates of house price growth recorded in 2016. Low mortgage rates and healthy employment growth continued to support demand in 2017, while supply constraints provided support for house prices. However, this was offset by mounting pressure on household incomes, which exerted an increasing drag on consumer confidence as the year progressed.
“The impact of previous policy changes (including additional stamp duty on second homes, changes to tax deductibility of landlord expenses and lending criteria) meant that demand from buy to let investors remained subdued in 2017.
“The significant disparity in house prices across the UK has been a recurring theme in recent years. In this respect, 2017 saw the beginnings of a shift, as rates of house price growth in the south of England moderated towards those prevailing in the rest of the country.
“London saw a particularly marked slowdown, with prices falling in annual terms for the first time in eight years, albeit by a modest 0.5 per cent. London ended the year the weakest performing region for the first time since 2004.”