The Nationwide Building Society has revealed that UK house prices rose by 0.8% in July, which the mutual says provides further evidence of an upturn in the housing market.

The annual rate of house price growth increased to 3.9% in July, though this figure was boosted by the low base for comparison, as prices declined by 2.6% in July 2012.

Robert Gardner, Nationwide’s chief economist, said: “House prices are currently around 12% higher than the lows seen in the midst of the financial crisis, though they are still around 10% below the all time highs recorded in late 2007.

“Signs of a modest improvement in wider economic conditions and further modest gains in employment are likely to be lifting buyer sentiment. An improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures such as the Funding for Lending and Help to Buy schemes, are also boosting the demand for homes.

“At the same time, the supply side of the market remains fairly constrained. Building activity is still subdued – in Q1 housing completions in England were down 8% compared to the same period of 2012 and around 40% below the average number of quarterly completions in 2007. The fact that rental growth has been consistently outstripping wage growth reinforces the notion that housing more generally remains in relative short supply.”

Jonathan Samuels, CEO, Dragonfly Property Finance, said: “Things are starting to come together for the property market and its momentum is increasing. The quarter on quarter change in house prices reflects this growing momentum.

“The economy is strengthening, people are getting more confident and mortgages are not just cheaper but much more accessible.

“The average figure, we should remember, can be misleading, as there are still many areas around the country where the property market is far from healthy, especially in the North.

“The recovery is promising but it is still, as yet, a patchwork recovery. The worry is that asking prices are getting ahead of economic reality. Sellers sense it’s their time once again but buyers, while more active, are still cautious and are unprepared to pay over the odds.”