Growth in house prices in the UK slowed to 0.2pc in September, although prices were still up 7.7pc on the same time last year, according to the latest Government figures.
The house price index produced by the Office for National Statistics and the Land Registry showed that growth had slowed from 0.6pc in the previous month.
The year-on-year increase remained stable at 7.7pc in September, having been as high as 9.3pc in June.
But prices will come under increasing pressure in 2017, the ONS warned, and may dip by up to 3pc thanks to “markedly deteriorating fundamentals for households and heightened uncertainty”.
The report said that purchasing power would weaken “markedly” and the labour market would soften over the next few months.
“We also suspect that business and consumer uncertainty will heighten in 2017, particularly once the UK formally launches divorce proceedings from the EU by triggering Article 50 and difficult negotiations increasingly come to the forefront,” it said.
Housing market activity is also likely to be put under pressure by the increasing gap between earnings and house prices and tighter mortgage lender criteria.
But the sharp fall in sterling could result in a rush of overseas buyers into the market, particularly for high-value properties in London.
House prices in the capital rose 1.4pc in September compared to the previous month.
Housebuilders have generally reported strong performance in the last few months, despite wider market volatility brought about in part by the vote to leave the European Union.
In a trading update ahead of its full-year results, housebuilder Crest Nicholson said today that it was on track to hit revenues of £1bn for the year, despite a slight drop-off in sales during 2016.
Average sales in the 12 months to the end of October averaged 0.81 per week, compared to 0.9 in the previous year, which the company attributed to higher sales prices in the locations it has been selling homes this year.
“In addition, during June and July, either side of the referendum on UK membership of the EU, sales volumes temporarily reduced alongside an increase in the level of cancellations, as uncertainties raised during the referendum and following the vote to leave, had an impact on purchaser confidence,” it added.
However, the number of homes the company built for open market sale was up 7pc in the period and selling prices were 20pc higher, at an average of £371,000.
The company laid out its succession plan, saying chief financial officer Patrick Bergin had been appointed group chief operating officer, sharing responsibilities with chief executive Stephen Stone on day-to-day operations and negotiating land acquisitions.