Halifax puzzles City with house price rise

The Halifax, Britain's biggest mortgage lender, countered fears of an imminent crash in the property market yesterday when it reported a sharp rise in house prices last month.

To the incredulity of the City, the Halifax said the average price of a home in the UK rose 1.4% in September to just under £163,000. Over the past 12 months, house prices have risen by 20.5%, it added.

The Halifax said the biggest increases in prices last month were in London and the south-east - the regions other surveys have pinpointed as suffering from the sharpest decline in market sentiment.

Martin Ellis, the Halifax's chief economist, warned against reading too much into one month's figures and said the trend over the latest three months still pointed to the market coming off the boil.

Prices in the third quarter of 2004 rose by 2.7%, well down on the 6.1% in the three months to June and the smallest quarterly increase since early 2001. Despite accounting for 80% of the 1.4% increase in prices across the country as a whole in September alone, London and the south-east were the weakest regions in the third quarter.

Mr Ellis said evidence of a slowdown was now apparent across all regions.

"While prices continue to rise more rapidly in the north, there are now signs that house price inflation in this part of the country is also slowing following a period of very rapid growth as first-time buyers increasingly face similar difficulties to those in the south in buying a home."

Howard Archer of Global Insight said: "The sharp 1.4% monthly rise in the Halifax house price index in September is very surprising, even allowing for the fact that it followed a fall of 0.6% in August.

"The September rise seems very much at odds with most of the other housing market data and survey evidence, which has recently been consistently pointing to a slowdown in the market."

Mr Archer said that a better guide was the Halifax index for August and September combined, which showed prices rising by 0.4% a month on average, well down on earlier in the year.