House prices rose sharply in August with values now 13% above those before the Covid crisis.

The Nationwide building society said the annual house price rate increased to 11%. The cost of the average home now stands at £248,857.

Property prices also recorded the second highest month-on-month rise in 15 years, up 2.1%. This follows a slight dip in July of 0.6%.

It had been thought that the phasing out of the stamp duty holidays introduced by the Chancellor in the wake of the Covid lockdowns might lead to a cooling in the market.

Robert Gardner, Nationwide's Chief Economist, said: "The bounce back in August is surprising because it seemed more likely that the tapering of stamp duty relief in England at the end of June would take some of the heat out of the market."

He said the strength of the growth might reflect strong demand from those buying a property priced between £125,000 and £250,000 who are looking to take advantage of the stamp duty relief in place until the end of September.

He added: "Lack of supply is also likely to be a key factor behind August's price increase, with estate agents reporting low numbers of properties on their books."

Nationwide predicts that underlying demand is likely to remain solid in the near term. Consumer confidence is said to have rebounded in recent months while borrowing costs remain low. This, combined with the lack of supply on the market, suggests continued support for house prices.

Gardner said: "As we look towards the end of the year, the outlook is harder to foresee. Activity will almost inevitably soften for a period after the stamp duty holiday expires at the end of September, given the incentive for people to bring forward their purchases to avoid the additional tax.

"Moreover, underlying demand is likely to soften around the turn of the year if unemployment rises, as most analysts expect, when government support schemes wind down.

"But even this is far from assured. The labour market has remained remarkably resilient to date and, even if it does weaken, there is scope for shifts in housing preferences as a result of the pandemic to continue to support activity for some time yet."