The New data also revealed that the average house price now stands at £195,621, up from £195,055 in June.
Robert Gardner, Nationwide's Chief Economist, said: “After moderating over the past twelve months, there are tentative signs that annual house price growth may be stabilising close to the pace of earnings growth, which has historically been around 4%.
This would bode well for a sustainable increase in housing market activity, though whether this will be maintained will depend on whether building activity can keep pace with increasing demand.
The outlook on the demand side remains encouraging. Employment growth has remained relatively robust in recent quarters, and, after a prolonged period of subdued growth, wage growth is also edging up. With consumer confidence buoyant and mortgage rates still close to all-time lows, demand for housing is likely to firm up in the quarters ahead.
It remains unclear whether activity on the supply side will catch up with demand. The number of new homes under construction has started to pick up, albeit from historically low levels, and further increases are required if a sustainable recovery in the housing market is to be maintained over the longer term.
The index also shows that stamp duty changes have reduced “bunching” at key price points.
Robert Gardner continued: “The slab structure used to result in significant distortions with a clustering of transactions at the tax thresholds. Under that system, paying £1 more would result in significant additional stamp duty being due (for example, paying £1 over the £250,000 or the £500,000 threshold used to trigger an additional £5,000 of SDLT).
Even though the change to SDLT only came into effect six months ago, the impact on the pattern of transactions is already evident, with much less bunching of transactions around the £125,000, £500,000 and in particular the £250,000 price points. Moreover, based on the first six months of transactions data from the Land Registry, nearly 235,000 purchasers in England and Wales have paid less tax under the new regime, with an average benefit of c£1,800.
The benefits are greatest in the South of England where average house prices are higher. We estimate that around 85% of transactions in London, the South West and South East have benefited from the changes, compared with around 55% in the North, Yorkshire and Humberside, and the North West of England.
However, we estimate that around 5,000 (2%) of purchasers paid more (two thirds of whom were in London), with an average of £28,000 more tax being paid compared with the old system.
On balance (considering the net effect of those paying more and those paying less), we estimate that the changes have resulted in around £275m less tax being paid than would have been the case under the old stamp duty regime.”
Jonathan Hopper, managing director of Garrington Property Finders, commented: "After June’s brief dip, house price growth has clicked back into gear. The cost of the average home is now within touching distance of the symbolic £200,000 mark.
But while buyer demand and confidence are strong, much of the rise in prices is being driven by constrained supply. With no sign of a summer lull yet, surging levels of buyers and a limited number of sellers have combined to drive up prices in much of the market.
The exception is the prime property market, which is still reeling from the rise in the top rate of Stamp Duty. While the Nationwide’s calculations show that the Stamp Duty changes have reduced price bunching, and that most buyers are paying less of the tax, the top 2% are paying an average of £28,000 more per purchase. With nearly half of all the Stamp Duty paid in England and Wales collected in London, this is having a substantial chilling effect on the capital’s prime property market.
The Stamp Duty hike was supposed to gently apply the brakes to stop the prime property market racing away. But in the event its effect has been more of an emergency stop. Even though both GDP and real wages are growing strongly, buyer sentiment is about more than just economics.
And there is a growing sense among buyers that the current bargain basement interest rates won't last much longer - with some mortgage rates creeping up already. With many predicting that the Bank of England’s Monetary Policy Committee will this week signal an imminent interest rate rise, the cost of borrowing is likely to increase by the end of the year.
While there is momentum at most price points, a rate rise will remove some steam from a market that continues to show impressive, if not inevitable, growth.”
Ben Thompson, Managing Director, estateagent4me, added: "Today's Nationwide House Price Index has revealed that property prices have increased by an average of 0.4% since July. While some may argue that this latest rise is simply a reflection of the growing economy, the reality is that buying a property remains unachievable for many Britons.
Until the government takes steps to reduce the vast gulf between supply and demand with a more sustained building programme, homeowners will need to use all of the resources available to ensure that their money is going as far as possible when buying or selling a home. Our research has revealed vast differences in what sellers can expect with different estate agents, not only in terms of how quickly these deals can be completed, but also the sale price agreed.
With a rise in interest rates almost certainly on the cards during the next 12 months, sellers need to act now to ensure they can achieve a swift sale at the best price possible - and this cannot be achieved by choosing an agent based purely on gut feel. Motivated sellers should choose the best agent based on hard data surrounding their performance, rather than word of mouth alone."
