UK house prices were down by 0.5% between June and July, taking the average property price to £244,229, said Nationwide.

The building society added that annual property price inflation reduced slightly to 10.5%, from its 17-year high of 13.4% in June.

Robert Gardner, Nationwide’s chief economist, said: “The modest fallback in July was unsurprising given the significant gains recorded in recent months. Indeed, house prices increased by an average of 1.6% a month over the April to June period – more than six times the average monthly gain recorded in the five years before the pandemic.

“The tapering of stamp duty relief in England is also likely to have taken some of the heat out of the market. The nil rate band threshold decreased from £500,000 to £250,000 at the end of June (it will revert to £125,000 at the end of September). This provided a strong incentive to complete house purchases before the end of June, especially for higher priced properties.

Race for space

The pattern of transactions has also shifted, said Nationwide.

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Over the past six months the proportion of sales involving detached and semi-detached properties has increased, while the proportion involving flats has declined significantly.

Plus, Land Registry data indicates that higher priced properties have been driving the increase in housing market activity since the pandemic struck. The number of transactions involving properties bought for £500,000 or higher increased by 37% over the 12 months to March 2021, compared to a rise of 2% for all properties.

Gardner added: “Shifting housing preferences appear to have been the more important factor in driving the increase in housing market activity, with people reassessing their housing needs in the wake of the pandemic. At the end of April, 25% of homeowners surveyed said they were either in the process of moving or considering a move as a result of the pandemic.”

Ashley Thomas, director of mortgage broker, Magni Finance, said: “As expected, the majority of the market has been quieter in July as the Stamp Duty relief has been reduced. However, there is still strong demand for clients looking to purchase a second or holiday home in the country or by the sea. For high net worth clients, in fact, buying a holiday home seems to be a priority. The staycation is here to stay and is set to have a material impact on house prices in the most sought-after areas.”