House prices up as average property value hits £195,621

House prices jumped by 0.4% month-on-month in July, pushing the average property value to a new all-time high of £195,621, Nationwide Building Society has reported.

Across the UK, house prices have increased by 3.5% over the last year, edging upwards from a 3.3% annual increase recorded in June.

The annual pace of price growth is now around one third of what it was a year ago. For much of summer 2014, annual house price growth was in double digits, with a 10.6% annual increase recorded in July 2014.

Robert Gardner, Nationwide's chief economist, said there are "tentative signs" that annual house price growth is falling closer into line with the pace of earnings growth, which historically has been around 4%.

He said: "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."

Nationwide, which tweaked the way it calculated its house price index this month, also said that the net effect of recent stamp duty reforms has meant £275 million less tax being paid by home buyers than under the old regime.

Changes to stamp duty announced in December's Autumn Statement meant there was a shift to home buyers paying a graduated version of the tax, as the old "slab" structure of stamp duty was abolished.

For the majority of home buyers, the tax has become cheaper, but the tipping point at which the tax becomes more expensive than under the old regime comes when homes cost upwards of £937,500.

Mr Gardner said: "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 (stamp duty land tax)."

He said that based on the first six months of transactions data from the Land Registry since the tax was reformed, nearly 235,000 home buyers across England and Wales have paid less tax under the new regime, with an average benefit of around £1,800.

Mr Gardner continued: "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."