House price divide widens

The north-south property divide is continuing to widen as the recession in manufacturing hits house price growth, Britain's biggest mortgage lender said today.

Figures from Halifax showed that while property prices surged by 7.5% in the south-west during the three months to the end of September, in the north-west house price growth ground to a halt and in Northern Ireland prices fell by more than 3%.

East Anglia also saw sharp rises, with prices jumping by 6.8% since June, the biggest increases for 13 years, and the West Midlands and Greater London also enjoyed good gains.

But in the north prices edged up by just 0.2%, and Scotland recorded a rise of 2.6% during the third quarter.

A similar picture emerged with annual house price inflation, with East Anglia reporting an 18.5% growth in prices, followed by Greater London (17.4%) and the south-east (15.6%). The smallest increases were in the north, north-west, Yorkshire and Humber and Scotland.

Martin Ellis, Halifax economist, said: "The north-south divide in house price inflation over the past year has been mainly a result of the differing fortunes of the regional economies.

"The south of England has been more buoyant, driven by continuing rapid growth in the service sector, which has resulted in growing housing demand.

"By contrast, the manufacturing recession has constrained economic growth outside the south where local economies are more dependent on the sector."

Overall house prices across the UK increased by 2.9% during the third quarter, well down on the second quarter's increase of 4.2%. Halifax said the slowdown was due to the general weakening in the economy which was beginning to curb housing demand, and it expects price growth to decrease further over the coming months.

It added that the ratio of house prices to earnings was above its historical average in Greater London, the south-east, the south-west and East Anglia, suggesting that first-time buyers were being priced out of the market.

The group said the prospect of significantly lower bonuses, and the recent sharp fall in equity markets was also likely to contribute to a price growth slowdown in Greater London.

Halifax, which is now part of the HBoS group following its merger with Bank of Scotland, added that it was still too early to say what impact events in the US would have on the market, but they had increased the possibility of a sharper reduction in house price inflation.

The most expensive place to buy a semi-detached house is London, where the average price is ?238,450, followed by Surrey where they cost around ?210,150.

South Humberside is the cheapest place to buy with a semi-detached house costing just ?51,700 and Dyfed is the next cheapest with houses going for ?54,000.