"The pace of price growth has been slowing. We expect this to continue, particularly in London compared with the rest of the country in coming months."
On a monthly basis, prices rose by 0.4%. The index said the fact that "house price pressures continued to grow in July" reflects the strength of demand relative to supply in the housing market.
However, the index reported that "some of the heat had been taken out of the market", with several indicators pointing towards weaker housing demand and supply in recent months.
On the demand side, the volume of lending approvals for house purchases fell by 5.1% in July 2016 compared to the previous month, continuing a downward trend since the beginning of the year.
As such, monthly approvals remain below the levels seen in the 10 months prior to stamp duty changes in April 2016. UK home sales fell by 0.9% in July 2016 compared to the previous month, which means that home sales on a monthly basis remain below levels seen in 2014 and 2015 and before the stamp duty changes in early 2016.
Furthermore, the RICS market survey for July reported a fourth consecutive month of falling new buyer enquiries, affecting all regions of the UK.
In terms of housing supply, RICS report that new sales listings on the market has fallen at the fastest monthly rate on record for each of the last three months.
Jeremy Leaf, north London estate agent and former RICS chairman, commented: "This is the first official post-referendum house price data and although it is a little dated it is reflecting what we have seen from other surveys and on the ground - that the pace of price growth has been slowing. We expect this to continue, particularly in London compared with the rest of the country in coming months.
"It is surprising that the index does not record more of a slowdown in price growth. On the ground we are finding that people are showing more caution than this although there is an underlying determination to get on with moving. People are negotiating hard and we expect that to be reflected in future surveys."
Adrian Gill, Director of Your Move & Reeds Rains, added: “Given this is the first month of data after Britain’s decision to leave the European Union, it is not surprising that house price growth saw a softening in July. Even if sentiment is slightly more cautious, which is not necessarily a negative in this period of uncertainty, an annual comparison shows the market remains buoyant."
