Property prices rose by 0.6% in June, and now stand 21.9% higher compared with a year ago, says the Halifax. The average house price now stands at £130,312.

The lender says there is a pronounced north/south divide with house prices increasing most strongly outside London and the South East. The southern market is expected to "pause for breath."

In the second quarter, the biggest price rises in Britain were in the North (8.0%), Yorkshire and the Humber (6.8%) and West Midlands (5.5%). Conversely, prices fell slightly in London (-0.9%) and the South East (-1.0%). These small falls have occurred following a doubling in prices in London and the South East over the past five years.

Year of the north

The last year has been the 'Year of the North'. Over the past 12 months, the North (36.4%) and Yorkshire and the Humber (33.0%) have seen the biggest house price rises followed by Wales (29.6%) - where the average price is approaching the £100,000 barrier - and the West Midlands (28.6%).

All other regions have experienced double digit increases, but London has slipped to the bottom of the table with the smallest rise in prices of the 12 regions over the past year (11.5%).

Mortgage repayment/salary ratio at lowest for 20 years

The fundamentals supporting the market are strong. Employment - the key driver according to Halifax research - is at a record high and low interest rates are maintaining mortgage payments at around their lowest levels as a proportion of gross earnings in the last 20 years.

Commenting on the figures Martin Ellis, Chief Economist, said:

"House prices increased by 0.6% in June with prices in the first six months of 2003 rising by 7.1%, double the long-term rate of increase.”

Increase of properties coming on the market

Halifax Estate Agents - one of the country's biggest networks - reports a continuing increase in the number of properties coming on to the market, which is helping to reduce some of the upward pressure on prices.

House price growth continues to slow towards 10% for the year

House price growth has slowed during the first half of this year compared to the exceptionally strong performance in 2002, and Halifax expect this to continue over the coming months.

“The rate of house price growth has, however, grown at a faster pace so far this year than we had expected,” continues Martin Ellis: “Following our usual six-month review, we are therefore slightly adjusting our forecast for house price growth in 2003, increasing it from 9% to 10%. There is a possibility, however, that the final outcome could well be house price growth of more than 10% this year.”

“The regions outside the south of England have seen much more rapid increases in house prices than the south this year. The northern regions are likely to continue to lead the way over the coming six months as house prices remain low relative to average earnings in these regions compared to the south, suggesting that there is scope for continuing buoyant conditions in the north.”

“The recent significant rise in prices outside southern England has seen a narrowing in the gap between prices in the north and the south. As a result, the gap between the average UK price in the second quarter (£129,443) and London (£218,404) narrowed to £89,000 from a record £95,000 in the first quarter of 2003. Despite this reduction, there continues to be a huge gap in property prices between the north and the south.”

“The current high level of prices in relation to earnings in the south is constraining demand in this part of the country, particularly amongst potential first-time buyers.”

Southern market expected to pause for breath

Ellis continues: “The latest figures for the industry show that first-time buyers nation-wide accounted for only 31% of all house purchases in the first five months of 2003 compared with 38% in 2002. As a result, we expect the market in the south to pause for breath during the remainder of the year. The small falls in prices in London and the South East during the second quarter need to be viewed in the context of a doubling in prices in these regions over the past five years.”

“There is a very mixed picture across London and the South East. Many areas continue to see price rises. Property prices are increasing in parts of outer London. Prices also continue to rise in many counties in the South East with the strongest rises in Oxfordshire and East Sussex.”

“There have been falls in some of the more expensive areas of London over the past year, such as Hammersmith and Fulham and Wandsworth, and counties such as Buckinghamshire and Essex have seen small falls in average prices in the second quarter.”

“Overall, housing demand in the south of England, as elsewhere in the UK, remains underpinned by low levels of unemployment and low interest rates. There also remains a persistent shortage of homes in the south, a phenomenon that will continue to support prices in London and the South East over the medium and longer terms."