Meanwhile, statistics from the Council of Mortgage Lenders (CML), also out yesterday, showed homeowners taking advantage of low interest rates as remortgage levels soared.
Month-on-month, prices increased by 0.6 per cent to an average of £208,476, the DCLG data showed.
However, over the 12 months to August prices fell by 1.3 per cent.
London was the only region in which house prices increased over the year, the figures show, rising by 3.2 per cent to an average of £347,505.
“These government figures have shown prices edging up for three months, but talk of a recovery risks sounding premature as prices have some way to go to regain the levels of a year ago,” said Peter Maskell from estate agents Brock Taylor.
“The modest up-tick in prices is more down to the current meagre levels of supply than a resurgent market.”
The number of remortgages rose by 33 per cent in the year to August, the CML said - an increase of nine per cent on July. In August 34,100 remortgage loans were taken out, worth a total of £4.2bn; and 52,000 house purchase loans were taken out in total - up two per cent on August 2010.
“Borrowers have been cashing in on the chance to fix their mortgage onto one of the incredibly affordable long-term deals on the market,” said Peter Rollings on March & Parsons estate agents.
“It’s also an excellent time to move, and those with decent deposits can expect remarkably cheap mortgage repayments,” Rollings added.