House prices increased by 1.8% in December, underlining the strength of the market, says the Halifax in it’s monthly survey out today. House prices rose by 15.4% during 2003, down from the 26.4% increase experienced during 2002.

2003 was definitely the 'Year of the North', reports the company, with annual house prices rising in the North by 33.7% - over twice the average UK rate (15.4%). In the south, annual house price gains during 2003 were; East Anglia (14.6%), Greater London (8.6%), the South West (6.7%) and the South East (5.8%). Annual House price growth in Wales was 31.8%, in Scotland 17.1% and in Northern Ireland 13.8%.

All regions of the UK have experienced house price increases during the final three months of 2003. The largest increases were seen in Wales (11.2%) and in the North (8.9%). House prices in Greater London increased during the final quarter of 2003 by a healthy 3.7%, up from the 2.1% growth experienced in the preceding three months.

During 2003, a further 88 towns in the UK saw average house prices rise over the £100,000 threshold for the first time. The average house price in 505 (80%) of the 634 UK towns analysed is now in excess of £100,000.

The three pillars that have underpinned the housing market during the past few years – low interest rates, good employment levels and good affordability - will continue during 2004. Unemployment levels continue to fall - the claimant count has fallen to 917,800 in November, down 2.2% on November 2002. There are no indications that unemployment levels will change dramatically during the next few years.

Commenting, Shane O'Riordain, General Manager, Group Economics, said, "The housing market is undoubtedly strong, but there are clear signs that the market will continue to slow down naturally as the impact of higher interest rates and a reduction in the number of first time buyers entering the market continues to kick-in."

House prices in the North continue to outperform the rest of the UK

The annual house price figures highlight that 2003 was definitely the 'Year of the North'. House prices increased in the North during 2003 by 33.7% - over twice the average UK rate (15.4%).

House prices in the North have now risen by almost 60% in total during the last two years – a rate of house price growth that is clearly unsustainable.

In the south, annual house price gains during 2003 have been; East Anglia (14.6%), Greater London (8.6%), the South West (6.7%) and the South East (5.8%). Annual House price growth in Wales during 2003 was 31.8%, in Scotland it was 17.1%, and in Northern Ireland 13.8%.

The Halifax expects to see house price growth of around 17% in the North during 2004, compared to 8% in the capital. This will mean that the north/south divide, which has narrowed considerably during 2003, will to continue to narrow during the coming year, before re-establishing itself in 2005.

* From December 2002 onwards the 'annual change' numbers are the quarterly year-on-year figures. These figures provide a much better picture of underlying trends compared to a monthly year-on-year number as it smoothes out any short-term fluctuations.

** The December 2002 fall of 2.2% was purely attributable to technical adjustments made to the Index. House prices are estimated to have increased by approximately 1% on an underlying basis.