Strong demand and tight supply conditions continued to drive house prices up by 2.2% in March, taking UK house prices through the £150,000 barrier with an average price of £151,467, according to the Halifax house price index out today.

The index is typically based on around 15,000 house purchases per month, and covers the whole calendar month. From this data, a 'standardised' house price is calculated and property price movements on a like-for-like basis (including seasonal adjustments) are analysed over time.

Commenting, Martin Ellis, chief economist, said: “Regionally, the north still leads the way with the biggest price rises experienced in northern England and Wales in the first quarter.”

“Prices are rising in the south, but have done so at a much more modest pace over the past year. This has led to a narrowing in the north/south divide and we expect this trend to continue during the remainder of 2004 as prices again rise more quickly in the north."

House prices continue to rise most rapidly in northern England and Wales

House prices increased in all regions of the UK during the first quarter, says the Halifax. The biggest rises were in northern England – North West (9.7%), North (9.4%), Wales (8.3%) and Yorkshire and the Humber (8.1%). The same regions have recorded the largest price rises over the past year with the North experiencing the biggest gain (36.0%).

At the other end of the spectrum, the southern regions of England have seen the smallest price rises over the last 12 months: The South East (7.3%), Greater London (9.1%) and East Anglia (9.3%) have all recorded price rises of less than 10%.

As a result, the north/south divide has narrowed with the gap between the average price in Greater London and the North falling by nearly £10,000 over the past year from £135,901 in 2003 Quarter 1 to £125,981 in 2004 Quarter 1.

The average price in Yorkshire and the Humber breached the £100,000 barrier during the first quarter, making it the last English region to do so. Average prices remain below this level in only Scotland (£85,212) and Northern Ireland (£93,692).

Despite the narrowing in the north/south divide, prices in the South East are above £200,000 with an average price of £208,105 in the first quarter whilst prices in London remain significantly higher than elsewhere at an average of £239,552.

Property transactions continue to pick up

Inland Revenue figures show a significant increase in the number of property transactions in England and Wales from 110,000 in January to 144,000 in February on a seasonally adjusted basis. Recent figures, however, have been distorted by a change in the process by which the Revenue collect data.

As a result more forms than normal were rejected in December and January, depressing the number of recorded transactions for these two months. The clearance of some of this backlog boosted February's figure. This change clearly makes interpretation of the recent monthly figures very difficult, but smoothing for this distortion still shows a healthy rise in transactions in the past few months with 120,000 property transactions in England and Wales on average in the three months from December to February, 11% higher than in the preceding three months and above the 114,000 monthly average over the past 10 years. These figures confirm the momentum in the housing market and provide further evidence of the recovery in activity following last year's 16% decline in transactions.

A shortage of properties for sale is still adding to upward price pressure

Whilst the number of properties sold has risen, the stock of properties available for sale on estate agents' books has fallen. The latest figures from the Royal Institute of Chartered Surveyors (RICS) show an 11% decline between October 2003 and February 2004, taking unsold stock levels very close to the lowest recorded level in May 2002.

The shortage of properties on the market is contributing to the ongoing strength of house prices. This finding is confirmed by Halifax Estate Agency – one of the country's largest estate agency networks –, who are reporting very high levels of interest from buyers, but low stock levels of houses for sale.

The proportion of First-Time Buyers remains at a 30 year low despite signs of a recent strengthening

According to the latest CML figures, there was a strengthening in first-time buyer (FTB) activity in February with an increase in both the number and the proportion of loans to first-time buyers. Whilst FTBs rose as a proportion of all house-buyers taking out a mortgage from 27% in January to 30% in February, this proportion remains the lowest in the last 30 years and is significantly below the 47% average since 1974.